Posts Tagged ‘orange beach condo loans’

17
Dec

Mortgage Rate Locks Are For Real

   Posted by: Cal    in Gulf Coast Mortgages

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I think many borrowers are under the impression that a “rate lock” is just a verbal agreement that the loan officer and customer make and after saying it out loud and clicking your heels twice, the rate is locked.

In reality, there is a process involved with locking a rate that involves pulling credit, running the application for an approval, registering a loan number, and then running the file through a “pricing engine” to get and secure the actual rate lock based on market conditions.

Today, I had a customer that had been non-committal for the last couple of days shopping for the best rate.

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Steve Russell
Mortgage Banker
PRMI
Phone: (850) 221-8334

Fax: 888-257-8383
steve@steverussellonline.com
www.SteveRussellOnline.com
Dear Valued Client,

While the mortgage market continues to generate a lot of chatter in both the media and in Washington, interest rates are currently near or at all-time lows. If you or anyone you know are looking to take advantage of these low rates, let me explain why now is the time to act.

Lately there has been talk about the 4.5% 30-year fixed rate mortgage. Will it become a reality though? Right now, no one really knows. Homeowners who could benefit from a lower interest rate need to know that even if 4.5% becomes a reality from Washington’s actions, it would only be available to home buyers, not homeowners seeking to better their rate. If you need to refinance, you will be left out.


You also may have heard about Hope for Homeowners, which is a program approved by legislators to help distressed homeowners. However, regardless of its best intentions, the program has not been embraced by investors, and it is not available to many it could help.

The bottom line is, the Fed announced recently that they are going to buy up to $600 billion in mortgage-backed securities. This has already driven rates to historical lows. In January, the SEC is meeting and information may be released that could have a significant bearing on rates, potentially for the worse.

Waiting to obtain the best rate is only possible for those with loan applications already in process. Interest rates are incredibly volatile and fluctuations that used to take months are now occurring in just days or even hours. If you don’t have an application in process, you could lose out.

We are already seeing lender backlog due to low interest rates. In 2003, with rates at these same low levels, we saw some lenders taking up to 90 days to close a loan.

Home loan rates are currently in the mid- to low-5% range. Home values are currently at 2003-2004 levels, coming down significantly from their high point. If you–or friends and family members you know–are contemplating seeking financing, now is the time to act.

With a first time home buyer tax credit of up to $7,500 and low or no money down programs available for many people today, now is a great time to buy a home.

If you have any questions about how we can help you, call us today.

Sincerely,

Steve Russell
PRMI
(850) 221-8334

steve@steverussellonline.com

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Steve Russell Mortgage Banker PRMI Phone: (850) 221-8334 Fax: 888-257-8383 steve@steverussellonline.com www.SteveRussellOnline.com

 

 

 

 

Dear Valued Partner,

The Chinese have a proverb: "May you live in interesting times." And we are living through interesting times indeed. Whatever the political posturing regarding the rescue plan, a plan needed to be passed. Credit markets are frozen and banks are going bust every day. This is not totally because of "toxic" mortgages. This has a lot to do with FASB 157, also known as "mark to market". Each day, lenders must mark their assets to the marketplace. It’s like you having to appraise your home everyday and, if your neighbor was under duress because she got very ill, divorced, lost her job and was forced to sell her home quickly, she may have sold it super cheap. Now, does that mean your house is worth that super cheap price, too? Clearly not. Why? Because you are not under duress. You have the time to sell your home and get a more normal price, which more accurately reflects true market conditions. But "mark to market" does not allow for this, which creates a vicious cycle. Why is this so bad? Because, as lenders mark down their assets the amount that they have previously loaned becomes much riskier in relation to their assets. For example, say a bank has $1 million in assets and say they have $15 million in loans outstanding. Their ratio is an acceptable 15 to 1. But should they take a paper write down of $500 thousand due to "mark to market" requirements, their ratio suddenly changes to 30 to 1. This is because their assets are now only $500 thousand after taking the paper loss, while their loans outstanding are still $15 million. And at 30 to 1 this bank is viewed as a risky investment. So the stock price starts to get hit, it becomes harder to borrow, and most importantly harder to make money. The bank is then forced to sell some of its loans to reduce its ratio…at cheap prices. And this makes the vicious cycle continue. And a quick look at the holdings of these loans show that 95% are problem free. Additionally, the Credit Default Swaps (CDS) that are used with the pools of mortgages are relatively safe. But this requires a bit of understanding. You see, when a pool of mortgage loans is put together it isn’t just A paper or B paper etc. it’s everything. It’s got some A paper, B paper, C paper…and even what looks like toilet paper. An "A" investor buys the whole pool but because they are an "A" investor their safety is greater because they can avoid the first 20% (an example) of defaults. So they own the whole pool but are sheltered from the first batch of defaults, and for this they get the lowest rate of return. As you can figure from here the more risk investors want to take, the higher the return. So the investments are relatively safe, but the accounting rules currently place undue pressure on the banking institutions. Now add to all this, the opportunistic "shorting" done on the financial stocks, much of it illegal because those shorts did not legitimately borrow shares (called naked shorting), and you exacerbate this whole problem. Thank goodness for the recent temporary ban on shorting in the financial sector. As for the plan, the government is the only one who can step in to do this. And they have to do this. And they will do this. The political posturing from both sides is just part of the process. This is not easy to understand for the general public. In fact most politicians don’t get this either. That’s why it is a difficult yet critical bill for them to vote on. Once this is done, it will take some time but the markets will stabilize. As for the real estate and mortgage industries, it will take a bit of time but we will make it through this. Rates will remain attractive and the influx of credit availability will help the housing market gradually improve. This ultimately will be the medicine needed to improve the situation overall. As always – please keep in touch during these volatile times. I am here to help you and your clients in any way that I can. Sincerely, Steve Russell PRMI (850) 221-8334 steve@steverussellonline.com

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