Mortgage News and Notes

Almost nothing in our lives is the same as it was just one month ago. And every day brings new and more difficult challenges. The most important thing, however, is that you and your families stay safe and healthy. Practice social distancing and follow every recommendation of the CDC and the orders of our Governors and Mayor.

Under Governor Hogan’s order, financial services firms such as RMC are deemed essential. We are open for business and operating each day. We are using every means at our disposal to eliminate face to face contact, such as e-signature, video conferencing, secure document uploads, and good old email and phone calls. Fannie and Freddie are assisting by offering more opportunities to use “exterior only” appraisals, which eliminate the need for the appraiser to enter your home. Closings are still a challenge, but the closing agents we work with are using best practices such as gloves, masks, separating parties, not trading pens and other precautions.

The bottom line is that we are here for you every day. We sometimes work from our homes but come to the office regularly. If any of you have a need for mortgage financing, you can rest assured that we can help. Contact Margie for more information on our Covid-19 precautions or if you just want to ask about rates.

We wish all of you good health, now and for the future.

Margie, Steve and Troy

Posted in:RMC and tagged: RMCRefinancepurchase
Posted by Steven Hofberg on April 15th, 2020 10:52 AM

Last week we reported on the financial upheaval in the mortgage market as a result of the coronavirus pandemic. The market remains extremely volatile, with rates changing daily, even hourly at times. But we are very encouraged by the fact that homes are being purchased and refinance mortgages are closing, even under these extraordinary conditions. Everyone is taking proper precautions, and avoiding face-to-face meetings.

Almost all parts of the mortgage lending process can be done electronically. An interior appraisal inspection, however, is not one of them. We have heard from our clients their very valid concerns about allowing the appraiser to tour their homes. So, I am happy to give you some good news. Fannie and Freddie have instituted temporary appraisal requirement flexibilities that allow many mortgages to qualify for an appraisal waiver, or an exterior only inspection. This includes purchases, which sometimes can qualify for a desktop appraisal, for which the appraiser need not even visit the property. 

We expect more announcements regarding temporary accommodations during the crisis, and we will report those to you as they happen. Also, please keep in mind that rates are changing so often that locking a loan now requires patience and close attention. Please contact Margie to see what is being offered.  

We want all of you and your families to stay healthy and safe.

Posted by Steven Hofberg on April 15th, 2020 10:45 AM

While all of us are self-quarantining and keeping adequate social distance, we thought our readers would like to know how the mortgage market has been affected by the economic upheaval caused by the coronavirus pandemic. A very respected analyst, Matthew Graham of Mortgage News Daily, said in his column on March 19, 2020, that “Today (3/19) was the most volatile day in the history of the mortgage market in many regards.” Graham bases his analysis on that day’s mortgage bond market, which pin-balled through a huge range of prices during the day, and actually changed direction massively (up to down or down to up) five separate times. In other words, your available rate went up or down massively five times during a single trading day.

 

Just two weeks ago we reported that mortgage rates were at 30+ year lows. And they were for a few days. Then they shot up as the markets turned chaotic. The Fed recently cut short-term rates to near zero, but more importantly for rates they also started buying mortgage bonds, some $52 billion worth on Thursday and Friday in order to inject liquidity and stability into the market. When you add the fact that the stock market was tanking, everything pointed to lower rates. Instead, mortgage rates moved significantly higher!

In the simplest of terms, the market is experiencing a flight to cash. Typically, investors react to bad economic news by moving from stocks to bonds, thus pushing rates down. Not now. Investors are moving to cash. That means there are many more sellers of mortgage bonds than there are buyers, which depresses bond prices. Lower bond prices = higher rates.

 

On the plus side, the mortgage market is still functioning, and transactions are proceeding (with appropriate health safeguards). With the Fed doubling down on its bond buying efforts, rates have come back down substantially as I write this on Monday. Tomorrow may be another story. Margie and Troy are still working and so RMC continues to serve our clients every day. Of course, we are not meeting clients face to face, but we have a number of resources available such as e-signature, video conferencing, secure document uploads, and good old email and phone calls.

 

Steven H Hofberg, Operations Manager

 

Posted by Steven Hofberg on March 27th, 2020 2:16 PM

Refinancing the balance of your 30-year mortgage to a 15-year offers tremendous benefits, including:

  • More of your payment goes to principal each month, building equity much faster.
  • The total interest you pay over the life of the loan is drastically reduced.
  • Rates for 15-year mortgages have dropped substantially recently, and are near historical lows.

Let’s look at how a 15-year refinance would benefit a typical homeowner.

Our borrower obtained a 30-year mortgage for $400,000 at a fixed rate of 4.50% two years ago, with a monthly payment (principal and interest) of $2027. After 24 months the remaining principal balance is $387,000. Continuing to pay the 30-year loan to maturity will cost $330,000 in total interest. But instead, they choose to refinance into a 15-year mortgage at 3.00%. The total interest to maturity is now only $98,000. Compared to sticking with the 30-year loan, our borrower will save more than $280,000!

Of course, switching to a 15-year mortgage will result in a higher monthly payment, but that increase goes towards principal, which builds equity much faster.

Remember, rates are subject to change, so contact Margie soon if you would like to hear more of the details. She would be happy to show you just how much you can save.

Have a great week!

Steven H Hofberg, Operations Manager


Posted in:Refinance and tagged: EquityRefinance15-year
Posted by Steven Hofberg on January 29th, 2020 1:29 PM

Adjustable Rate Mortgages (ARMs) are in the news these days. Not so much about their rates and market share, but on the issue of how the annual adjustments to the interest rate are calculated. Almost all residential ARMs use an index called LIBOR, which is based on a survey of rates major global banks are charging other banks for short-term loans. At adjustment time on your Note, the lender checks LIBOR and adds the margin specified to calculate the new rate that you will pay on the principal balance for the next 12 months. The issue in the news is that the entity that administers LIBOR has, for a variety of reasons, announced that publication of LIBOR is not guaranteed after 2021.

 

Many financial analysts believe LIBOR will be around longer, but for now the search is on for a successor. Fannie and Freddie are interested in SOFR, a measure of the cost of overnight financing between institutions secured by US Treasury securities. There are other indexes whose sponsors are hoping to replace LIBOR as well. The issue for those homeowners that currently have an ARM is that when it comes time for the interest rate to adjust, the new index may not behave in the same way as LIBOR has historically. This would be especially noticeable in periods of economic volatility.

 

ARMs already have uncertainty built in relative to fixed rate mortgages. The potential change to a new index within the next few years adds one more uncertainty, although as with any unknown the results could be good or bad. Incidentally, if you want to see how this change will take place, check your ARM note under “The Index” where you will see this language: “If the Index [LIBOR] is no longer available, the Note Holder will choose a new index that is based upon comparable information.” That is very wide latitude for the lender, I would say.

 

Perhaps it is time to evaluate whether a switch to a fixed rate mortgage is the right choice for your circumstances. Contact Margie to discuss your ARM and she will be happy to run some numbers and help you decide your best option.

 

Steven H Hofberg, Operations Manager

Posted in:Refinance and tagged: RatesRefinanceARM
Posted by Steven Hofberg on November 18th, 2019 10:44 AM

The Federal Reserve cut short-term interest rates last week by 0.25%, to approximately 2.00%. As regular readers of our newsletter have learned, short-term rates (in this case the federal funds rate) do not necessarily affect longer term rates such as mortgages. This holds true of the past week; mortgage rates, which have risen slightly in the past couple of weeks, looked at the Fed’s move and just shrugged. Not much movement at all.

 

Factors having a greater effect on mortgage rates include trade tensions, slowing global growth and, currently, some recent positive housing data. This week’s recommendation is simple; it’s not wise to extrapolate from the Fed to the mortgage market. The better strategy is to check with Margie to see where rates stand. She will be happy to run the numbers for you.

Steven H Hofberg, Operations Manager

Posted by Steven Hofberg on September 27th, 2019 2:40 PM

Wow, lots of news over the past few days. And as we always mention in our newsletters, much of that news does affect mortgage rates. As you probably know, rates have gone down recently to a rather stable range in the high 3s. But on Thursday and Friday we had several big shocks to the market, and rates jumped up about a quarter of a percent. That’s a big jump!

 

What happened? Many financial analysts are pointing to two events. First, optimism on future trade talks between the US and China, as both countries delayed tariffs and gave indications of their interest in further negotiations. That helps the stock market, but hurts the bond market. Second - a really huge one - the attack on Saudi oilfields. The attack reduced their production by half, which amounts to 5% of the world’s oil production. This one has caused great uncertainty, to which markets always react badly. Oil prices did spike up on Monday, but most think there is sufficient world supply at least for now. That may change at any time.

 

The moral of this story is that you shouldn’t be complacent about mortgage rates. They are historically volatile. Rates are still very good right now, but there is lots of uncertainty in the market. So, if you are looking to buy or refinance your existing mortgage but haven’t started the process, give serious consideration to moving forward soon.

Posted in:Rates and tagged: RatesRefinancepurchase
Posted by Steven Hofberg on September 18th, 2019 12:34 PM

This month's question is one I hear often. If you have a client facing a similar scenario as part of their separation agreement, I would be happy to speak to you or your client. Please feel free to contact me.

 

Margie Hofberg, President

Residential Mortgage Center

 

I am refinancing to take my spouse off the deed and mortgage. Per our agreement, I have to give her $60,000 for her share of the equity in the marital home. My parents have offered to give me the $60,000 so that I don’t have to increase my loan amount to cover it. Can I do that and, if yes, how would it need to be structured to ensure that I can get my refinance approved?

 

Yes! If the separation agreement specifies that you need to give your spouse $60,000 as part of the refinance/equity buyout, we have to verify the source of funds for the buyout. If the funds are coming from your parents as a gift, they would have to sign a gift letter stating that there is no expectation of repayment. In other words, that it is not a loan. We would also verify that they have the money to give you, and document the transfer of the funds them to either you or the settlement agent.

Posted by Steven Hofberg on August 27th, 2019 1:44 PM

Some of you have been asking “what is an ‘inverted yield curve’ and how does it affect me personally?” The news cycle has been filled with commentary about it lately. Economists generally agree that an inverted yield curve can signal a coming recession, but not always. All recessions have been preceded by an inverted yield curve, but not all inverted yield curves have led to recessions.

 

A yield curve shows the relationship bonds with different terms have regarding their yield. Ordinarily, you want a higher rate of return for buying a bond (or a CD) with a longer term. Two benchmark bonds are the US 2-year bond and the US 10-year bond. The 10-year bond will almost always offer a higher rate of return than the 2-year bond, due to the increased interest rate risk over a much longer period. However, last week the yield on the 10-year bond fell below that of the 2-year bond. Needless to say, people became concerned.

 

This is the “safe haven” reaction to uncertain times. Staying with economics, many analysts are looking at continuing trade wars and the looming mess of a Brexit (among other global tensions) for creating worry in the investment community and board rooms of major corporations. Consequently, there is a move from stocks to bonds, which drives down interest rates. 

 

The silver lining: mortgage rates tend to track the 10-year bond pretty closely. Right now, those rates are really good. If you have been considering buying a home or refinancing, it’s time to take advantage of this market.

 

Steven H Hofberg, Operations Manager

Posted by Steven Hofberg on August 22nd, 2019 11:29 AM

Dear Friends:

Remember when refinancing your mortgage was an endless mass of documents and closing packages that were sometimes north of 100 pages? Not so much anymore. With document imaging and digital signatures, the mortgage process is now more streamlined than ever. RMC is constantly increasing our use of technology and our clients are enjoying the benefits.

At a recent closing, a client told Margie that she was so happy with the ease and lack of stress throughout the entire process. In her situation, she had recently gone through a separation and equity buyout, so having that part of her life in decent shape certainly took away a great deal of stress. She said the last thing she wanted to go through now was endless paperwork for a refinance. But there was substantial money to be savedabout $300 per month. So she took the plunge and to her surprise and delight, the process was smooth and not at all stressful.

If refinancing seems like a steep climb to you, give us a chance to show you the most efficient and low-stress process, allowing you to focus on the financial benefits that will be the result.

Steven H Hofberg, Operations Manager

Residential Mortgage Center Inc

Posted in:Refinance and tagged: RatesRefinance
Posted by Steven Hofberg on August 11th, 2019 3:08 PM

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