Question on mortgage rates for HLS

[SD Realtor]

HLS perhaps you can help with this one…

As you know the recent rally in the 10 year has been fairly substantial. However it appears long term rates have not responded and we have had some discussion about that. The general consensus that we all seem to agree on is of course the secondary market response to repurchasing loans. Many think that the originators will have to continue to build hefty risk premiums that buyers will have to pay so that the loans will be able to be resold.

Can you comment on the rate sheets last week? Did you see any improvement on any programs, (even say a 30 year fixed under the 417k conforming limit for someone with smoking credit). If the 10 year continues to stay at a low level do you think any programs will come down at all?

Any general commentary will be appreciated. I have fielded different stories from different brokers I have worked with.

[HLS]

Hi SD…

Not sure what input you were getting. Rates ARE lower than last week. Definite improvement.
The 10YR (TNX) spike up was from mid May,and after 9 weeks it’s right back to 4.8.

Rates are back to about where they were. Today, conforming FNMA-FHLMC 30YR Full Am are no more than 6.375% at par.
That’s .25-.375 less than a few weeks ago. 5YR ARM- 5.875%

Long term mortgage rates are not directly related to moves in the TNX. There is still an iverted yield curve. 30 YR rates are often less than 7 & 10 ARMS..

Qualifying is THE big issue. Average Joe/Jane have NO clue about underwriting guidelines. One tiny issue kills the deal for them, and can push their rate a full point or more.

General Comments:

Loans up to 80% still price well. 2nds behind the 80% is where the problem starts. Credit Score becomes so important. Higher the LTV, higher the risk to lender.

Lenders still price out 80/++ loans, with higher priced 2nds, but also price out single loans above 80%, with PMI included.
There is no need to worry about selling off the 2nds this way, but rate is higher.

There are zillions of dollars available looking for returns. There are crazy exotic loans being invented every week. Debt will bury people who don’t understand it, but it is an opportunity to wealth and a better life for those who do.

I don’t worry about trying to predict rate moves, it’s not fair to my clients. With a global economy, past trends mean little to me, and a quarter point move against someone can cost a small fortune over time, if I am wrong. Terrorists move 24 hours a day and so do the markets.

There are so many loan programs in the market, nobody can know them all. Prime loans don’t have prepay penalties, but today there is a low LTV subprime 5YR ARM that is cheaper than a prime loan, but it comes with a 3 YR prepay.

Giving people options so they can decide what’s right for them is what’s important to me, with the pros and cons.

Many people are in the wrong loan for various reasons, and many people have way too much equity tied up that they cannot get to. IMO they got bad advice.
Also amazing how many friends and family have screwed people on their mortgages.

Most people don’t know how to shop for a loan, and think that they got a great loan(but probably didn’t)

Many loan folks should be ashamed of themselves but they aren’t. It’s a rogues gallery. Smart people fall for no cost loans, that end up costing them dearly. Too many “salespeople” pushing loans that are not in borrower’s best interest. Too little understanding of options.

My point is, it’s more important to get the right rate/loan at any point in time, instead of waiting for rates to drop a quarter point and getting screwed on fees, but happy with the rate.

Too many people have been a slave to their mortgage, which could have been avoided.

The amount of “equity” that is tied up that people cannot get to is staggering, also paper profits in the stock market. Many people have a false sense of security which concerns me.

Whenever possible, my goal is to get people into better overall financial situations, not just a home loan, and get them to realize the risks, which many are oblivious to.]

Don’t know if I answered you question, what was it? 😉

[HLS]

Hi SD…

Not sure what input you were getting. Rates ARE lower than last week. Definite improvement.
The 10YR (TNX) spike up was from mid May,and after 9 weeks it’s right back to 4.8.

Rates are back to about where they were. Today, conforming FNMA-FHLMC 30YR Full Am are no more than 6.375% at par.
That’s .25-.375 less than a few weeks ago. 5YR ARM- 5.875%

Long term mortgage rates are not directly related to moves in the TNX. There is still an iverted yield curve. 30 YR rates are often less than 7 & 10 ARMS..

Qualifying is THE big issue. Average Joe/Jane have NO clue about underwriting guidelines. One tiny issue kills the deal for them, and can push their rate a full point or more.

General Comments:

Loans up to 80% still price well. 2nds behind the 80% is where the problem starts. Credit Score becomes so important. Higher the LTV, higher the risk to lender.

Lenders still price out 80/++ loans, with higher priced 2nds, but also price out single loans above 80%, with PMI included.
There is no need to worry about selling off the 2nds this way, but rate is higher.

There are zillions of dollars available looking for returns. There are crazy exotic loans being invented every week. Debt will bury people who don’t understand it, but it is an opportunity to wealth and a better life for those who do.

I don’t worry about trying to predict rate moves, it’s not fair to my clients. With a global economy, past trends mean little to me, and a quarter point move against someone can cost a small fortune over time, if I am wrong. Terrorists move 24 hours a day and so do the markets.

There are so many loan programs in the market, nobody can know them all. Prime loans don’t have prepay penalties, but today there is a low LTV subprime 5YR ARM that is cheaper than a prime loan, but it comes with a 3 YR prepay.

Giving people options so they can decide what’s right for them is what’s important to me, with the pros and cons.

Many people are in the wrong loan for various reasons, and many people have way too much equity tied up that they cannot get to. IMO they got bad advice.
Also amazing how many friends and family have screwed people on their mortgages.

Most people don’t know how to shop for a loan, and think that they got a great loan(but probably didn’t)

Many loan folks should be ashamed of themselves but they aren’t. It’s a rogues gallery. Smart people fall for no cost loans, that end up costing them dearly. Too many “salespeople” pushing loans that are not in borrower’s best interest. Too little understanding of options.

My point is, it’s more important to get the right rate/loan at any point in time, instead of waiting for rates to drop a quarter point and getting screwed on fees, but happy with the rate.

Too many people have been a slave to their mortgage, which could have been avoided.

The amount of “equity” that is tied up that people cannot get to is staggering, also paper profits in the stock market. Many people have a false sense of security which concerns me.

Whenever possible, my goal is to get people into better overall financial situations, not just a home loan, and get them to realize the risks, which many are oblivious to.]

Don’t know if I answered you question, what was it? 😉

[NotCranky]

Hello HLS,
Do you mind giving the break down on the 90-10 investor programs for SFR rentals? Is PMI required. Are fixers allowed? What do you think about the programs? If you have time.
Thanks.

[NotCranky]

Hello HLS,
Do you mind giving the break down on the 90-10 investor programs for SFR rentals? Is PMI required. Are fixers allowed? What do you think about the programs? If you have time.
Thanks.

[SD Realtor]

HLS –

You pretty much did indeed answer my question.

Basically the fundamental question that many people always ponder have to do with tracking mortgage rate movements. That is, what is the best index to track the movements of mortgage rates. As you know, there are so many programs out there, it is a loaded question and difficult to answer. Many people do not even know that lenders send out rate sheets all the time, espcecially when bond yields are moving.

I have to admit the question was somewhat selfish in nature as I have been looking for myself lately.

So what index would you advise people to look at in order to get a general idea which way mortgage rates are trending. The 30 year bond?

Also yes I am in total agreement with you regarding the qualification process. Unfortunately it is about 5 years late in coming but better late then never. In the end it will lead to a financially healthier brand of homeowner barring a major recession and substantial loss of jobs, (which of course could very well happen)…

[SD Realtor]

HLS –

You pretty much did indeed answer my question.

Basically the fundamental question that many people always ponder have to do with tracking mortgage rate movements. That is, what is the best index to track the movements of mortgage rates. As you know, there are so many programs out there, it is a loaded question and difficult to answer. Many people do not even know that lenders send out rate sheets all the time, espcecially when bond yields are moving.

I have to admit the question was somewhat selfish in nature as I have been looking for myself lately.

So what index would you advise people to look at in order to get a general idea which way mortgage rates are trending. The 30 year bond?

Also yes I am in total agreement with you regarding the qualification process. Unfortunately it is about 5 years late in coming but better late then never. In the end it will lead to a financially healthier brand of homeowner barring a major recession and substantial loss of jobs, (which of course could very well happen)…

[HLS]

I’m happy to figure out whatever..

Busy day, sorry.
I’ve only been on this board about a week. Is there a way to communicate directly/privately or do I post my contact info ?
I don’t want to SPAM or be inappropriate.

The “general” track is the 10YR bond (TNX) and Prime lender rates change daily. or even intra-day. There are locks available from 15 day to 60 days with a .50% spread, although the great subprime deals are floor rates and didn’t change at all in last 7 days. (!?)

Without being funny, before being able to quote accurate rates, I need answers to about 20 questions.

Most people don’t ask these questions, and it just leads to misunderstandings and incorrect quotes.

If you plan on keeping a loan for at least 5 years, I strongly suggest looking at buying the rate down, if the funds are available. You lock in a lower rate and payment for the life of the loan. (Some make sense at 2.5 years others take longer to pencil out)

For a fixed amount, you get a lower fixed rate for the life of the loan. It’s all about security and insurance. You can buy rates down into the 5’s today, whether or not it makes sense is up to you. The long term benefit is there.

Example: 400K IO loan has payments of $26,000 YR
Is it worth paying $12,000
to have annual payments of $23,500 instead ?
You save $1800 YR (gross) Simple breakeven is almost 7 YRS, it’s actually better than that.
(The buy down could be as little as $2,000 to save $375 YR, gross breakeven of 5.33 YRS)

If you plan on keeping the loan long term without refi’ing, it’s a great option.

Many/most loan folks make money on the back end of a loan without telling you (Rebate, YSP, etc) by overcharging in rate.
MORE IMPORTANT, If you buy the rate down, they CANNOT make a penny on the back end; it’s impossible to overcharge AND undercharge at the same time. Most people never get the option to buy down the rate because of this.

So for a fee, you can get the long term rate and payment that you want, fixed for up to 30/40 years, without waiting for a market low.

As you know, timing the market is near impossible. Most people don’t get the lowest rate possible at the time they got their loan anyway.

My general advice to everybody is to ALWAYS have some liquid CASH funds that you can get to quickly, over and above Stocks, Bonds, CD’s and retirement accounts. There is a great sense of security in money in da bank. If it takes an I/O loan to be able to do this, so be it.

It’s amazing the number of people who are in a rush to pay off a mortgage, but have no cash and don’t enjoy their life.
IMO, it’s poor choice. Life is for living.

[HLS]

I’m happy to figure out whatever..

Busy day, sorry.
I’ve only been on this board about a week. Is there a way to communicate directly/privately or do I post my contact info ?
I don’t want to SPAM or be inappropriate.

The “general” track is the 10YR bond (TNX) and Prime lender rates change daily. or even intra-day. There are locks available from 15 day to 60 days with a .50% spread, although the great subprime deals are floor rates and didn’t change at all in last 7 days. (!?)

Without being funny, before being able to quote accurate rates, I need answers to about 20 questions.

Most people don’t ask these questions, and it just leads to misunderstandings and incorrect quotes.

If you plan on keeping a loan for at least 5 years, I strongly suggest looking at buying the rate down, if the funds are available. You lock in a lower rate and payment for the life of the loan. (Some make sense at 2.5 years others take longer to pencil out)

For a fixed amount, you get a lower fixed rate for the life of the loan. It’s all about security and insurance. You can buy rates down into the 5’s today, whether or not it makes sense is up to you. The long term benefit is there.

Example: 400K IO loan has payments of $26,000 YR
Is it worth paying $12,000
to have annual payments of $23,500 instead ?
You save $1800 YR (gross) Simple breakeven is almost 7 YRS, it’s actually better than that.
(The buy down could be as little as $2,000 to save $375 YR, gross breakeven of 5.33 YRS)

If you plan on keeping the loan long term without refi’ing, it’s a great option.

Many/most loan folks make money on the back end of a loan without telling you (Rebate, YSP, etc) by overcharging in rate.
MORE IMPORTANT, If you buy the rate down, they CANNOT make a penny on the back end; it’s impossible to overcharge AND undercharge at the same time. Most people never get the option to buy down the rate because of this.

So for a fee, you can get the long term rate and payment that you want, fixed for up to 30/40 years, without waiting for a market low.

As you know, timing the market is near impossible. Most people don’t get the lowest rate possible at the time they got their loan anyway.

My general advice to everybody is to ALWAYS have some liquid CASH funds that you can get to quickly, over and above Stocks, Bonds, CD’s and retirement accounts. There is a great sense of security in money in da bank. If it takes an I/O loan to be able to do this, so be it.

It’s amazing the number of people who are in a rush to pay off a mortgage, but have no cash and don’t enjoy their life.
IMO, it’s poor choice. Life is for living.

[HLS]

RUST, do you mean 80/10 ?

Single loans over 80% either require a separate PMI payment OR can be “lender paid” (They say there is no MI, whether it’s factored in or not, you do pay a higher rate)

For the first time, separate PMI payments in 2007 are tax deductible. It is not been determined if this will roll over into 2008 AND their are income limitations.

It’s better to take an all inclusive loan and have the write off for sure.

I’m unclear on your request above. Are you putting 10% down or want 100% financing for non owner ?
Minor cosmetic fixers just appraise for less, but major structural fixers are a different breed. They can require a “cost to cure” analysis and can get a bit complicated.

There are piles of money available for loans, at some rate. The less risk there is to the lender, the better your options get.

Can you imagine what would happen if lenders stopped lending more than 75%-80% on homes ??
Prices would plummet. It’s a way to control the market, however the opposite happened and the market became out of control.

[HLS]

RUST, do you mean 80/10 ?

Single loans over 80% either require a separate PMI payment OR can be “lender paid” (They say there is no MI, whether it’s factored in or not, you do pay a higher rate)

For the first time, separate PMI payments in 2007 are tax deductible. It is not been determined if this will roll over into 2008 AND their are income limitations.

It’s better to take an all inclusive loan and have the write off for sure.

I’m unclear on your request above. Are you putting 10% down or want 100% financing for non owner ?
Minor cosmetic fixers just appraise for less, but major structural fixers are a different breed. They can require a “cost to cure” analysis and can get a bit complicated.

There are piles of money available for loans, at some rate. The less risk there is to the lender, the better your options get.

Can you imagine what would happen if lenders stopped lending more than 75%-80% on homes ??
Prices would plummet. It’s a way to control the market, however the opposite happened and the market became out of control.

[Arraya]

Long term mortgage rates are not directly related to moves in the TNX. There is still an iverted yield curve. 30 YR rates are often less than 7 & 10 ARMS..

HLS,

I have always been confused by this… How does the inversion of the yeild curve affect pricing?

I’ve noticed the arms pricing out worse than 30 year. Is it fair to assume when the curve is not inverted that the arms would price out better than the 30 yr?

SD R,

I think the 10 year is still the best indicator of mtg rates that we have. However, anything that is not a “plain vanilla” conforming loan is in question.

I think underwriting is still a work in progress and will not be worked out for quite some time for anything that does not fall into the the, below 80% LTV, fully documented income, greater than 680 fico range. i.e non-conforming. It’s all up in the air.

until wall street and the lenders come to an agreement on how to underwrite non-conforming loans there will be no good indicators on these types of loans….

[Arraya]

Long term mortgage rates are not directly related to moves in the TNX. There is still an iverted yield curve. 30 YR rates are often less than 7 & 10 ARMS..

HLS,

I have always been confused by this… How does the inversion of the yeild curve affect pricing?

I’ve noticed the arms pricing out worse than 30 year. Is it fair to assume when the curve is not inverted that the arms would price out better than the 30 yr?

SD R,

I think the 10 year is still the best indicator of mtg rates that we have. However, anything that is not a “plain vanilla” conforming loan is in question.

I think underwriting is still a work in progress and will not be worked out for quite some time for anything that does not fall into the the, below 80% LTV, fully documented income, greater than 680 fico range. i.e non-conforming. It’s all up in the air.

until wall street and the lenders come to an agreement on how to underwrite non-conforming loans there will be no good indicators on these types of loans….

[NotCranky]

I don’t think admin is concerned about reasonable networking. In any case he has had plenty of opportunity to weigh in on it.Perhaps we should ask what he is comfortable with? Some people post links to their blogs which have links to web pages on the right hand side of Rich’s Forums page below active topics.

If you would like to repond to my question the anonymous version of my e-mail is [email protected]. No hurry.There is no eminent deal to close. I don’t get really worked up about timing the rates this point. I am not touching equity until I feel a hell of a lot better about this mess we discuss here at piggington’s. I am looking at buying detached SFR rentals when we can pencil them out or close to it, with 10-20% down and some sweat equity. I am the procurring agent and contractor. I have heard about a 90-10 program and thought it might be a way to stretch capital into more houses.
EDIT: Sorry HLS I was posting to you when your response came up. I did mean 90-10 . Pacifictrust Bank is one group that is doing it. Maybe it is only available in the community banks? I am assuming you originate loans, if you want to go ahead and email I will have your contact info.
Best wishes

[NotCranky]

I don’t think admin is concerned about reasonable networking. In any case he has had plenty of opportunity to weigh in on it.Perhaps we should ask what he is comfortable with? Some people post links to their blogs which have links to web pages on the right hand side of Rich’s Forums page below active topics.

If you would like to repond to my question the anonymous version of my e-mail is [email protected]. No hurry.There is no eminent deal to close. I don’t get really worked up about timing the rates this point. I am not touching equity until I feel a hell of a lot better about this mess we discuss here at piggington’s. I am looking at buying detached SFR rentals when we can pencil them out or close to it, with 10-20% down and some sweat equity. I am the procurring agent and contractor. I have heard about a 90-10 program and thought it might be a way to stretch capital into more houses.
EDIT: Sorry HLS I was posting to you when your response came up. I did mean 90-10 . Pacifictrust Bank is one group that is doing it. Maybe it is only available in the community banks? I am assuming you originate loans, if you want to go ahead and email I will have your contact info.
Best wishes

[Author]

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