Archives for December 2015

Home prices up over 5.00 percent

The most recent Case-Shiller HPI (Home Price Index) shows that nationally, prices were up over 5.00% in October 2015 compared to October 2014.  The increase in sales was helped by a slight improvement in the economy, low inventory along with continued low interest rates.

Sales may slow in the coming months with introduction of new industry regulation along with slightly higher interest rates to finish off the year.  Mortgage rates typically a tad bit higher towards the end of the year (all things being equal).   Overall home prices (nationally) remain below their 2006 peak.

Mortgage rates post Fed meeting

As expected the Fed announced a 1/4 point increase in Fed funds rate….and just to be clear; they did not raise mortgage rates (see the below Fed and mortgage rates post for the relationship between the Fed and mortgage rates).  So what happens next?  Hard to say but most likely mortgage rates will move to various economic reports and other markets.  Meaning if the data shows the economy weakening then that should help push mortgage rates lower or if the data points to a stronger economy then mortgage rates should move higher.  Also bond yields may move based on dollar strength; as the dollar gets stronger yields might fall and thus California mortgage rates should improve.

Every year around this time we hear the usual rates will be higher next year. And not just slightly higher; dramatically higher.  However that has not happened.  While we’ve seen some years with slightly higher rates (nothing dramatic) we have seen years of flat to lower so guessing what’s in store for 2016 is difficult at best.   Due to the holidays and cold weather the period between December and February usually sees a decrease in refinance and purchase volume and then we see an uptick in March and April.  Sometimes mortgage lenders will be aggressive with rates during this time to add new business to a traditionally slow period.

The Fed and mortgage rates

Below is a great article from Mortgage News Daily, a leading industry site, about the Fed and mortgage rates.  The movement of mortgage rates obviously affects refinance and purchase applications however few people understand the relationship between Fed action and mortgage rates.  Refinance volume has been moderate to slow this year as everyone has prepared for higher rates.  The below article does a good job explaining that the anticipation for Fed action raises mortgage rates (generally speaking) rather than the actual move by the Fed.  And we’re seeing proof of that since bond yields are lower today then when they were 24 hours ago before the Fed announcement.  Could they move higher in 4-8 weeks; sure but the move would not be based on Fed action from December.

Mortgage News Daily:

“Everyone knows the rate hike is coming. It’s not as if financial markets have been sitting on their hands, waiting for the Fed to confirm that they’re actually going to hike when more than 90% of market participants believe it’s going to happen. Far from it, in fact. Market participants always make trades that correspond with their best guess about the future. If traders think rates are going higher, they trade rates higher well before the Fed hike confirms it. This has obviously been a huge part of the pressure on rates in 2015, and failing to mention this current and ongoing effect of the Fed rate hike would be irresponsible. In other words, the Fed hike has already pushed mortgage rates higher, even though it hasn’t happened yet (the hike).

Then there’s the more complicated topic of how direct an effect the Fed Funds Rate even has to have on something like mortgage rates. The short answer is that the two can move in completely opposite directions, and they have! Even in the most recent Fed rate lift-off in 2004, longer term rates like mortgages and 10yr US Treasuries were flat to slightly lower as the Fed began a series of hikes. Of course those longer term rates had previously spiked in anticipation of the Fed’s policy tightening, but there again, that’s exactly my point in the previous paragraph.

The bottom line is that no one can accurately claim to know what the effect on mortgage rates would be for any given Fed scenario. To do so would be to claim that one’s own opinion/knowledge superseded the collective power of the entire financial market. You can be sure the market has already priced mortgage rates to reflect all of its anticipations about the near term future. Now, as always, the next move higher or lower will be driven by the things that the market did NOT see coming or that the market has NOT yet been able to account for.”

Fannie Mae updates mortgage underwriting requirements

Fannie Mae recently updated their mortgage Automated Underwriting Software (AUS) with some minor adjustments to their mortgage underwriting requirements.  Here is a snapshot of some of the new features of DU 9.3:

Increased LTV/CLTV Guidelines for High Balance

95% LTV/CLTV for Owner Occupied Purchase
80% High Balance Cash Out (Owner Occupied)
80% NOO Purchase

Introduction of HomeReady Mortgage

HomeReady replaces the MyCommunity Program
Lots of guideline changes – look for a highlight of this program later this week

Non-Occupant Borrower Now Allowed

Fannie Mae now allows Non-Occupying Borrowers

One Year Tax Returns for Self-Employed Borrowers

Fannie Mae now may only require one year tax returns for Self Employed borrowers.

How to obtain a fast mortgage approval

The mortgage approval process can be easy or it can be difficult; a lot depends on how prepared you are before you start the process.  Loan officers do their best in requesting the specific items needed for approval.  However sometimes they do need to add to the list based on the documentation sent in from the borrower and if that happens try to be patient and know the loan officer is trying their best to make it as simple and easy as possible.

  1.  Make sure you give your full financial picture when talking with your loan officer about getting a mortgage loan approval.  Keeping things back will only delay the process.  If you own any additional property; make sure you disclose that up front.  Job history and income….be honest as lenders will verify all this information.  If you own part of a company, even a very small percentage; let the loan officer know upfront.  Lastly; if you’re trying to refinance or purchase a home as a primary or secondary residence but it’s really a non-owner occupied (rental) property be advised that you are breaking the law, can go to jail and it’s almost a near certainty the lender will eventually find out with all the verifications that go on during and after the process.
  2. To obtain the best possible California mortgage rates for various loan products; make sure your credit score is actually where you think it is.  Go online and obtain copy of your credit report with a true FICO credit score.  Know that the scores lenders will pull up will be different but they should be in the same ballpark.  There are a ton of credit services that do there own scoring and usually that is WAY off.  Try to get 3 scores directly from Trans Union, Equifax and Experian…..that will give you a decent picture of your credit picture.
  3. When the loan officer requests documentation; send in exactly what is asked for….not your interpretation on what’s needed.  If you do have questions; be sure to ask for clarification.  When a loan officer asks for tax returns for the mortgage approval; don’t just send in your W-2s if you receive them or 1 page of your tax return.  Send in the entire tax return.  And don’t black out any information because the loan officer will only request you resend the documentation with nothing blacked out.
  4. When you receive your conditions for closing be sure to send them over in a timely manner.  Unless it’s an unusual request try to send in any requested items within a few days to avoid delays.