MBS are down -18/32 (FNMA 30-yr 3.0 at 101.01), around 18/32 below morning levels, and at the low for the day. Unfavorable repricing took place. While the stock market barely moved today, bond prices declined sharply. The economic news was not bond-friendly, but it did not seem to justify a move of this magnitude. The main factor was the report that Greece will compromise to continue to receive bailout payments. This reduced the risk that Greece will exit the European Union. Bigger picture, while the February selloff in bonds has erased nearly all the gains from January, current MBS prices match the best levels seen during 2014. The Dow is up 25 points. Tomorrow, Industrial Production, PPI, Housing Starts, and the Fed Minutes will be released.
Wehn your looking to buy a home or even refinance, the process and terminology can be really confusing. THUS the Creating of “The Mortgage Update YouTube Channel”
- Why do clients get different interest rates?
- What is a 203K rahb loan?
- How much should you be paying to get a mortgage?
- Whats the first thing you should do when preparing to buy your 1st Home?
Find out the ANSWERS to these and many more questions.
Instead of going through the Modification nightmare, try the alternative Government bailout program known as HARP:
You may be eligible for HARP if you meet all of the following criteria:
The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
The current loan-to-value (LTV) ratio must be greater than 80%.
The borrower must be current on the mortgage at the time of the refinance, with a good payment history in the past 12 months.
If your loan is owned by Freddie Mac, you may check your potential eligibility for HARP here.
If your loan is owned by Fannie Mae, you may check your potential eligibility for HARP here.
The Consumer Financial Protection Bureau recently unveiled an Internet-based tool designed to help consumers shop effectively for the lowest possible mortgage interest rate. For this tool to work, it must help mortgage shoppers distinguish between rate differences that are justified, which borrowers would have to pay in a perfect market no matter how effectively they shop; and rate differences that arise because lenders know more than borrowers and control the process, which might be overcome by effective shopping.
I have been examining the CFPB tool to see how well it meets this challenge, and will report on it next week. This article lays the groundwork by looking at the different sources of rate differences.
Justifiable Rate Differences
Some borrowers pay higher interest rates than others for reasons that have nothing to do with their knowledge or ability to shop. They would pay more even in a perfect market. The reasons boil down to a few key points.
Transaction timing differences: The rate quoted to one borrower may differ from the rate quoted to another if the quotes apply to different times and the market changed within that period.
Mortgage lenders set their rates every morning after secondary markets have opened and they have checked the opening prices. The rates posted may last through the day, or they may not, depending on what happens in secondary markets during the day.
Shoppers can place no credence in price quotes that do not show the date and time to which they apply. Effective shopping requires access to price quotes that are time-stamped.
Lender fee differences: Mortgage lenders charge upfront fees, some defined as a percent of the loan amount, which are called “points,” and others that are a fixed dollar amount. The rate difference between loans with the highest fees and those with negative fees (rebates) can be as large as 0.625 percent. A rate quote that does not also show the fees that go with it is meaningless.
- Differences in transaction features: From a pricing perspective, each mortgage loan can be viewed as a collection of nine transaction features that affect its price. In summary, the list of nine is as follows:
- State location of property: Loans in states with laws that make it more costly to foreclose on a mortgage will carry a higher price (rate and/or fees).
- Occupancy type: Loans on second homes or rental properties will be priced higher than loans secured by the borrower’s primary residence.
- Property type: Loans secured by properties other than single-family detached homes will be priced higher than loans secured by single-family homes.
- Loan purpose: Refinance loans in which the borrower withdraws cash will be priced higher than loans to finance a home purchase or to refinance without taking cash out.
- Loan amount: Loans that are too large to sell to Fannie Mae or Freddie Mac will be priced higher than those that are below the maximum size limits of the agencies.
- Down payment: Loans with the smallest permissible ratio of down payment (or equity) to property value will be priced higher than loans with a larger down payment.
Credit score: Loans with the lowest permissible credit score will be priced higher than loans with a higher credit score.
Lock period: Loans on which the lender locks the price for more than 30 days will be priced higher than those with 30-day locks.
- Waive escrow: Some borrowers want to pay taxes and insurance themselves, rather than set up an escrow account from which the lender will make the payments. Such borrowers are said to “waive escrow,” and they pay a higher price than those who accept escrow.
Unjustifiable Rate Differences
Market imperfections: Interest rate differences associated with differences in the timing of transactions, in lender fees and in important transaction features are justifiable in the sense that they would exist even if markets were perfect. But this market is very far from perfect because of the complexity of mortgages, the complexity and length of the mortgage process, and the sizeable knowledge imbalance between lenders and borrowers. For these reasons, some borrowers pay more than others on what would otherwise by an identical transaction.
One of the worst of the market imperfections, made possible by the long processing period required to generate a mortgage, is the fake price quote. Since rate quotes do not commit a lender until they are locked, and the market is very likely to change before that happens, some lenders are tempted to “low-ball” — meaning to quote a price they have no intention of delivering — in order to be selected by the borrower. Once the borrower gets involved in the process, such lenders have no difficulty finding explanations for a price adjustment, and the cost to the applicant of disengaging and beginning anew somewhere else becomes increasingly high.
I spend a lot of time advising borrowers on how to avoid unjustified charges, and the new CFPB rate tool, which I will report on next week, is aimed at this problem.
Over the past few months I have been posting updates in regards to interest rates and the MBS markets. This information if very important to those in the mortgage industry, but what I am really trying to do is educate homeowners & potential homeonwers.
What topics would you prefer I focus my POSTS
- HOMEOWNERSHIP the benefits as well as the drawbacks’
- Interest Rates
- Special Programs for refinancing and how to save
- Special programs for 1st Time Home buyers
- Real estate finaning in general
- Market Values and trends
- You fill in the BLANK………………………
MBS are down -7/32 (FNMA 30-yr 3.0 at 103.08), around 3/32 lower than Friday at this time. Early investors may have priced at a range of levels.
MBS have given back some of Friday’s gains this morning. The December Core PCE price index was flat was November, matching the consensus, and it was just 1.3% higher than one year ago. This is the Fed’s preferred inflation indicator, and the Fed’s stated target level is 2.0%. Personal Income also matched expectations with an increase of 0.3%. The Dow is down 10 points. ISM Manufacturing and Construction Spending will be released at 10:00 et.