Boston MA mortgage lender

by Brian Cavanaugh, Senior Mortgage Banker, RMS Mortgage and SmarterBorrowing.com

Overall, despite being a fairly light week in terms of economic releases and relate events, it is still relatively crucial for the mortgage market. We saw the yield on the benchmark 10-year Treasury Note spike higher Friday as a result of the stronger than expected employment data. Stocks rallied as a result of that data, extending the 2012 stock rally that has pushed the Dow up over 5% and the Nasdaq up 11% year-to-date. Both indexes are at their highest levels since May 2008 and December 2000 respectively. This has me believing we are due to see a pullback in stocks fairly soon. If/when this happens, we should see funds shift back into bonds for safety, leading to lower mortgage rates. Keep in mind that this is more or less just speculation, but I am expecting to move to a less conservative approach regarding short-term mortgage rates in the near future.

If I were considering financing/refinancing a home, I would….

LOCK if my closing was taking place within 7 days…

LOCK if my closing was taking place between 8 and 20 days…

FLOAT if my closing was taking place between 21 and 60 days…

FLOAT if my closing was taking place over 60 days from now…

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed

There are only two pieces of monthly economic data scheduled for release this week. Neither of them is considered to be highly important, so we don’t have much to pin our hopes on or to be concerned with this week. There are two Treasury auctions on the calendar that may influence mortgage rates the middle part of the week and the second part of Fed Chairman Bernanke’s testimony to Congress, but no important economic data.

Nothing of concern is due tomorrow, so look for the stock markets and news from Europe- particularly Greece, to drive the markets tomorrow. Fed Chairman Bernanke will speak to the Senate Budget Committee at 10:00 AM Tuesday. I don’t expect him to say anything different than he said last week to the House Budget Committee, but the Q&A portion of his appearance could lead to something new. It is worth watching, but it will probably not lead to a noticeable change in the markets or mortgage rates.

Treasury Auctions Ahead

The two important Treasury auctions come Wednesday and Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the more important one as it will give us a better indication of demand of mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would likely result in upward afternoon revisions to mortgage rates.

Unemployment Numbers

With little monthly and no quarterly economic reports being posted, Thursday’s weekly release of unemployment figures may end up moving the markets and mortgage rates more than it traditionally does. The Labor Department is expected to announce that 370,000 new claims for unemployment benefits were filed last week, rising slightly from the previous week’s total. The higher the number of new claims for benefits, the better the news for the bond market and mortgage pricing as it would indicate weakness in the employment sector.

The first monthly report comes early Friday morning when December’s Goods and Services Trade Balance data will be posted. This report measures the U.S. trade deficit and can affect the value of the U.S. dollar versus other currencies, but it usually does not cause enough movement in bond prices to affect mortgage rates. It is expected to show a $48.2 billion trade deficit.

Consumer Sentiment

February’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment will be released late Friday morning. This index measures consumer willingness to spend and usually has a moderate impact on the financial markets. If it shows an increase in consumer confidence, the stock markets may move higher and bond prices could fall. It is currently expected to come in at 74.0, down from January’s final reading of 75.0. That would indicate consumers were less optimistic about their own financial situations than last month and are less likely to make large purchases in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, this would be considered good news for bonds and mortgage pricing.

  • Are you a possible Massachusetts First Time Homebuyer?
  • Do you have a Real Estate client inquiring about current Mortgage Rates?
  • Do you have any Refinancing questions?
  • Should you be thinking about Refinancing out of your ARM (Adjustable Rate Mortgage)?
  • Have your Real Estate clients been Pre Approved?

bc@smarterborrowing.com  617.771.5021

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Brian Cavanaugh of SmarterBorrowing.com is back with his Massachusetts Weekly Mortgage Rate Update. Scroll to the bottom for Brian’s valuable Massachusetts Mortgage Rate Lock Advice!

Inquire within for current Mortgage Rates or Guidelines   bc@SmarterBorrowing.com  617.771.5021

Overall, I am expecting to see a much more active week in the financial markets and mortgage pricing than last week. The most important day of the week is either Tuesday or Friday due to the reports being posted those days and the FOMC meeting scheduled. Please maintain contact with your mortgage professional if you have not locked an interest rate yet because we may see sizable changes to mortgage pricing more than one day this week.

If I were considering financing/refinancing a home, I would….

LOCK if my closing was taking place within 7 days…

LOCK if my closing was taking place between 8 and 20 days…

LOCK if my closing was taking place between 21 and 60 days…

LOCK if my closing was taking place over 60 days from now…

Busy Week Ahead

This week is fairly busy in terms of the number of economic releases and other events scheduled that may influence mortgage rates. There are only four pieces of economic data for us to watch, but three of them are highly important to the markets. In addition to the economic reports, we also have the last FOMC meeting of the year and two important Treasury auctions that are likely to impact bond trading and mortgage pricing. Those events, coupled with the likelihood of further overseas developments from Europe and possibly others, make it highly likely that we will see plenty of movement in the markets and mortgage rates this week.

There is nothing of relevance scheduled for tomorrow. This means we can expect the stock markets to drive bond trading and mortgage rates again. If the major stock indexes open the week with gains tomorrow morning, bonds may move lower, pushing mortgage rates higher. But a weak open in stocks could lead to slightly lower mortgage rates tomorrow. We could also see traders position themselves ahead of the week’s agenda, so even though there is nothing concerning on the calendar, we could see mortgage rates change.

Consumer Price Index Out

The week’s most important economic data comes Friday morning when November’s Consumer Price Index (CPI) is posted. It is similar to Thursday’s Producer Price Index, except it tracks inflationary pressures at the more important consumer level of the economy. Current forecasts call for an increase of 0.1% in the overall index and a 0.1% rise in the core data reading. The core data is watched more closely because it excludes more volatile food and energy prices, giving a more stable reading for analysts to consider. This data is one of the most watched inflation indexes, which is extremely important to long-term securities such as mortgage related bonds. Rising inflation erodes the value of a bond’s future fixed interest payments, making them less appealing to investors. That translates into falling bond prices and rising mortgage rates.

Retail Sales Report

Tuesday has two important events, starting with November’s Retail Sales report. This 8:30 AM ET release will give us a key measurement of consumer spending by tracking sales at retail level establishments. This data is highly important to the markets because consumer spending makes up two-thirds of the U.S. economy. Rapidly rising consumer spending raises the possibility of seeing solid economic growth. Since long-term securities such as mortgage bonds are usually more appealing to investors during weaker economic conditions, a large increase in retail sales will likely drive bond prices lower and mortgage rates higher Tuesday. Current forecasts are calling for an increase of 0.6% in November’s sales.

Last Fed Meeting

The last FOMC meeting of the year will also be held Tuesday, adjourning at 2:15 PM ET. There is not much debate about what the Fed will do at this meeting with no chance of them raising key short-term interest rates. Therefore, the post meeting statement will likely be the sole source of a market reaction. This statement has the potential to have a significant influence on the markets and mortgage rates as investors look for any indication of what and when the Fed may do next. One potential move would be more debt purchases by the Fed. An announcement of another round of quantitative easing (QE3) could help boost bond prices and improve mortgage rates Tuesday afternoon. Besides that, it is believed that there isn’t much more the Fed can do to help boost economic activity.

Treasury Auctions

There are Treasury auctions scheduled for several days this week, but the two important ones are the 10-year Note sale Tuesday and the 30-year Bond sale Wednesday. Tuesday’s auction is the more important of the two and will likely influence mortgage rates more. Results of each sale will be posted at 1:00 PM ET. If they were met with a strong demand from investors, particularly international buyers, we should see afternoon strength in bonds and improvements to mortgage pricing those days. On the other hand, a weak interest in the auctions could lead to upward revisions to mortgage rates during afternoon hours.

Wednesday has little to be concerned with, except for the 30-year Bond auction. November’s Producer Price Index (PPI) will be posted early Thursday morning. It measures inflationary pressures at the producer level of the economy. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. If Thursday’s release reveals stronger than expected readings, indicating that inflationary pressures are rising, the bond market will probably react negatively and drive mortgage rates higher. If we see in-line or weaker than expected numbers, the bond market should respond well and mortgage rates should fall. Current forecasts are showing a 0.2% increase in the overall index and a 0.1% rise in the core data.

Nov. Industrial Production Report

November’s Industrial Production data is also scheduled to be posted Thursday morning, but a little later than the PPI. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Analysts are expecting it to show a 0.2% increase in output, indicating modest manufacturing growth. A smaller than expected rise would be good news for bonds, while a stronger reading may result in slightly higher mortgage pricing. However, the PPI release is more important to the markets than this data is.

  • Are you a possible Massachusetts First Time Homebuyer?
  • Do you have a Real Estate client inquiring about current Mortgage Rates?
  • Do you have any Refinancing questions?
  • Should you be thinking about Refinancing out of your ARM (Adjustable Rate Mortgage)?
  • Have your Real Estate clients been Pre Approved?

bc@smarterborrowing.com  617.771.5021

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

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Mortgage Guy Brian Cav has been riding the Massachusetts mortgage rate roller coaster this week! Seems like the Fed’s new Quantitative Easing II policy has got the market jumping all over the place. Well, here’s the lowdown from BC:

Brian Cav

Wow, I am at a lack of words for what has happened over the past week with Mortgage Rates. Rates have changed up to 5 times per day since last Wednesday. We are just now starting to see some stabilization after a week of bad mortgage market losses.

Most Lenders are offering 4.25% with 1 point of origination for a 30 year fixed with standard costs. The same can be said at 3.75% for a 15 year fixed. You must have a 740 FICO credit score or better and enough equity in your home to refinance or standard down payment requirements on a purchase. Jumbo 30 year and 15 year fixed along with 5/1 ARMs are very near all-time lows as of today. Jumbo Mortgage financing requires a 80% loan to value or a 20% down payment on purchases.

Inquire within for current Mortgage Rates or guidelines at bc@SmarterBorrowing.com 617.771.5021

Economic Data

Wednesday’s bond market has opened in positive territory following the release of favorable economic data and a relatively flat open in stocks. The stock markets don’t appear ready to rebound from yesterday’s selling with the Dow up and the Nasdaq up. The bond market is currently up 5/32, which with yesterday’s afternoon strength should improve this morning’s mortgage rates by approximately .25  of a discount point over yesterday’s morning pricing.

There were two reports posted this morning. The first was October’s Consumer Price Index (CPI) that showed weaker than expected inflation readings. The Labor Department said that the overall CPI reading rose 0.2% and that the core data was unchanged from September’s level. Both of these readings were just shy of forecasts, meaning inflationary pressures were not as strong at the consumer level of the economy as many had thought. That is good news for the bond market and mortgage rates, but did not come as too much of a surprise after yesterday’s PPI numbers.

The Commerce Department gave us today’s second piece of data. They announced that construction starts of new homes fell 11.7% last month, falling to their lowest level in the past year and a half. This is favorable data for the bond market and mortgage rates since it indicates housing sector weakness. Unfortunately, the data is not considered to be highly important, preventing it from influencing this morning’s mortgage rates by much.

The final monthly report of the week will come from the Conference Board late tomorrow morning when they release their Leading Economic Indicators (LEI) for October. This is a moderately important report that attempts to predict economic activity over the next three to six months. It is expected to show a 0.6% increase, meaning economic activity will rise fairly rapidly over the next couple of months. Generally speaking, this would be bad news for bonds. However, since this data is considered only moderately important, its results need to vary by a wide margin from forecasts for it to affect mortgage rates.

Also tomorrow, the Labor Department will give us last week’s unemployment figures. They are expected to announce that 442,000 new claims for unemployment benefits were filed last week. This would be an increase from the previous week and considered good news for the bond market. However, since this is only a week’s worth of new claims data, its impact on tomorrow’s mortgage rates will likely be minimal. The larger the number of new claims filed, the better the news for the bond market and rates.

FLOAT or  LOCK

If I was closing on a Home Mortgage in the next 0 to 15 Days – FLOAT

If I was closing on a Home Mortgage in the next 15 to 30 Days – FLOAT

If I was closing on a Home Mortgage in the next 30 to 60 Days – FLOAT

If I was closing on a Home Mortgage in the next 60+ FLOAT

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

  • Are you a possible Massachusetts First Time Home Buyer?
  • Do you have a Real Estate client inquiring about current Mortgage Rates?
  • Do you have any Refinancing questions?
  • Should you be thinking about Refinancing out of your ARM (Adjustable Rate Mortgage)?
  • Have your Real Estate clients been Pre Approved?

bc@SmarterBorrowing.com 617.771.5021

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We welcome for the first time, guest blogger Ricardo Brasil. Ricardo is a Vice President at one of America’s largest Banks, and is recognized as one of the top mortgage originators nationally. For more info, go to his website at www.ricardobrasil.com or call him directly at (617) 897-5192.

Ricardo Brasil

Quantitative Easing Policy I (QE I): The First Go-Around

Some feel there is a good chance that the FOMC’s planned announcement to purchase U.S. treasury bonds will cause mortgage rates to fall even further. Unlike the Fed’s first quantitative easing (QE I) program, however, borrowers could see a muted (or even negative) response by the time QE2 winds down next June when it comes to rates for home loans.

Mortgage rates improved substantially the last time the Fed carried out its first Quantitative Easing program from December 2008 through March 2010. $1.75 trillion in bonds and mortgage backed securities were purchased during that time and mortgage interest rates dropped by more than 1% over the same period for a 30-year fixed rate mortgage. In 2010 they have fallen further to just over 4% last week with no points.

Quantitative Easing Policy II (QE II): The Here & Now

There are those who argue the Fed’s second attempt at Quantitative Easing, known as QE2 or QEII, is different. Mortgage rates have the QE2 effect ‘baked into the cake’ according to many industry pundits. The goal of this type of Fed action is to lower real interest rates and increase spending in sectors that respond to interest rate changes. This includes home purchases as well as business spending and investment. Quantitative easing could decrease mortgage rates by increasing mortgage backed securities’ liquidity enough that the lower end MBS’s begin to sell. On the contrary, the purpose of quantitative easing ultimately is to stimulate the economy, and if it is successful, over time there should be real indicators of growth that show up in production and employment figure increases. These will surely put pressure on interest rates to rise.

Additionally, the direct impact on the economy of this quantitative easing policy will be a weakening of the US dollar. A weaker dollar in turn should make US products cheaper to foreign countries and cause exports to rise. With a weak dollar imported products of all kinds from clothes to consumer electronics will increase in price because it will take more dollars to buy the same amount of products. The increased cost of imports will drive up retail prices and increase inflation. As a result, inflation will cause home prices to rise and mortgage rates as well. This wouldn’t happen immediately but could be expected in the in the not too distant future. Moderate inflation and job growth are what the Fed is looking for.

Rising production of exported products should generate more profits for domestic companies and those profits should result in increased production and job growth. That in turn will lead to the stock market going up and for those in the mortgage industry who know this all too well, mortgage rates tend to follow the direction of the financial markets. Rates rise when the economy is clicking on all cylinders and equity markets are moving higher.  Rates decrease when the economy and equity markets struggle.

Float or Lock Down? Don’t Fight The Fed

As the cliché goes, don’t fight the Fed. Well, when it comes to mortgage rates, when we know the Fed is trying to stimulate the economy and put off dealing with inflation, I would do away with any floating bias and will be taking advantage of historically low rates for the time being without holding off for lower rates that we may not see.

Mortgage rates are currently hovering at record lows and remain very attractive especially in combination with low home prices. Although there will continue to be fractional fluctuations in rates over the next few months, mortgage rates should be low but range bound for the foreseeable future before being forced higher by inflationary pressures. After rates improved a bit following the Fed’s announcement they have gone up as recent economic news has been quite sanguine especially with the 151,000 jobs added in October. Mortgage bonds have fallen a whopping 143 basis points in the past 5 days and the yield on the 10yr-note has spiked 28 basis points higher.

Ricardo Brasil can be reached at www.ricardobrasil.com or call him directly at (617) 897-5192.

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Our Mortgage Guy, Brian Cav, is back with his Massachusetts weekly mortgage rate report, and his advice is to LOCK IN:

Brian Cav

The Stock Market is extending its gains and Mortgage Rates are starting to go up despite bad economical data coming from overseas. Yesterday afternoon we had a worsening pricing in Mortgage Markets because Greece had their credit rating cut by Moody’s to “junk.” Ouch. Floating your loan is very risky right now with investor optimism improving quickly. With the new Fannie Mae Loan Quality Initiative (eff. June 1st, 2010) please do not take out any new credit, extend any credit or have your credit pulled while applying for mortgage financing.  This is extremely important for all of those borrowers currently refinancing and looking to close June and July. Yes, you should be refinancing. The Massachusetts Mortgage Bankers Association says mortgage refinancing applications are up 21% the month of May.

The Conventional mortgage rate is still in the 4.625% to 4.875% range for well qualified borrowers. To get the best conventional mortgage pricing you must have a FICO score  of 740 or higher, and a 80% or less loan to value (1% discount point quoted with current rates).  The 15 year fixed conventional fixed mortgage is currently at all time lows.

Inquire within for current Mortgage Rates bc@SmarterBorrowing.com 617.771.5021

FLOAT or  LOCK

If I was closing on a Home Mortgage in the next 0 to 15 Days – LOCK

If I was closing on a Home Mortgage in the next 15 to 30 Days – LOCK

If I was closing on a Home Mortgage in the next 30 to 60 Days – LOCK

If I was closing on a Home Mortgage in the next 60+ LOCK


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Weekly Mortgage Rate Lock Advisory, May 19, 2010

by Rich Vetstein on May 19, 2010

Brian Cav, Smarterborrowing.com

If it’s Wednesday, that means our weekly Massachusetts Mortgage Rate Report from our own Mortgage Guy, Brian Cav of Smarterborrowing.com. Take it away, Brian!

Mortgage Rates are currently staying and settling down near 2010 lows. I would have thought they would have come up a bit from last weeks close but they have not. Yes, now is absolutely the time to think about refinancing in you have not already. I would suggest LOCKing in at these current mortgage rates. I think it is a gamble if you do not. Remember, mortgage rates always rise faster than they fall.

The 30 year conventional rate mortgage remains in the 4.75% to 5.00% range for well qualified borrowers. To secure a 2010 low interest rate on a conventional mortgage you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point discount fee. Yes, there are options to finance without paying the discount point. If you are not planning on keeping your home for more than 5 years, you should consider a no cost loan or a Adjustable Rate Mortgage (5/1 ARM, 7/1 ARM or 10/1ARM). On a no cost loan, the Lender will pay the fees for you however you will pay a higher than par market rate. Or you can finance a ARM product were the rates are near all time lows if you know you will be in your current home for a specific amount of time.

Inquire within for current Mortgage Interest Rates. bc@SmarterBorrowing.com 617.771.5021

Economic Data

Wednesday’s bond market initially opened in negative territory but has since erased those gains as stock prices started to fall. The stock markets are in selling mode again with the Dow down and the Nasdaq down. The bond market is currently up, which might improve this morning’s mortgage rates by approximately .125 of a discount point.

Today’s important inflation data gave us favorable results. The Labor Department reported that the Consumer Price Index (CPI) fell 0.1% last month when it was expected to rise slightly. Even better news was the core data reading that showed no change from March when it was expected to rise slightly. This means that inflationary pressures at the consumer level of the economy were lighter than thought. That is good news for rates because it makes long-term securities such as mortgage-related bonds more attractive to investors.

Later today, the minutes from the last FOMC meeting will be released. Market participants will be looking at how Fed members voted during the last meeting and any comments about inflation concerns in the economy. The goal is to form opinions about when the Fed may make a move to key short-term interest rates. The minutes will be released at 2:00 PM ET, so if there is a market reaction to them it will be evident during afternoon trading.

Tomorrow brings us the last relevant economic data of the week when April’s Leading Economic Indicators (LEI) are posted at 10:00 AM ET. This Conference Board report attempts to measure economic activity over the next three to six months. It is expected to show a 0.2% increase from March’s reading, meaning that economic activity is likely rise slightly during the next few months. A decline would be good news for the bond market and mortgage rates, while a larger increase could cause mortgage rates to inch higher tomorrow.

FLOAT or  LOCK

If I was closing on a Home Mortgage in the next 0 to 15 Days – LOCK

If I was closing on a Home Mortgage in the next 15 to 30 Days – LOCK

If I was closing on a Home Mortgage in the next 30 to 60 Days – LOCK

If I was closing on a Home Mortgage in the next 60+:  LOCK

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

  • Are you a possible Massachusetts First Time Homebuyer?
  • Do you have a Real Estate client inquiring about current Mortgage Rates?
  • Do you have any Refinancing questions?
  • Should you be thinking about Refinancing out of your ARM (Adjustable Rate Mortgage)?
  • Have your Real Estate clients been Pre Approved?

bc@SmarterBorrowing.com 617.771.5021

Credit: Bloomberg, Yahoo Finance, Mortgage News, MBS Quoteline, WSJ, NY Times

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Mortgage Guy Brian Cav has his weekly Massachusetts mortgage rate lock advisory.

Mortgage Markets have gone up a bit the past 24 to 48 hours. The European bailout will have a ton to do with what happens with markets in coming weeks. Mortgage rates are going up and down based on the guidance they get from headline news and the stocks. With mortgage rates down near the low of the year, I love LOCKing all loans closing in the next 30 to 45 days. Borrowers closing in more than 30 to 45 days should consider paying the extra costs to secure a longer term lock. Most Lenders will charge a 0.25%  fee (based on your loan amount) to lock in your loan for more than 45 days. On a $300,000 loan, that is an extra cost of $750 which is a small price to pay over the life of your loan if rates do increase in the next 45 days. I think they certainly will.

The par 30 year conventional rate mortgage remains in the 4.75% to 5.00% range for well qualified borrowers. To secure a  interest rate on a conventional mortgage you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated 1 point discount fee. For consumers with lower FICO scores (700 and less) and higher loan to values, you should consider an FHA loan.

Inquire within for current Mortgage Interest Rates. bc@SmarterBorrowing.com 617.771.5021

Economic Data

Wednesday’s bond market opened in negative territory following early stock strength. The stock markets are showing noticeable gains with the Dow and Nasdaq up. The bond market is currently down, but we still may see a slight improvement in this morning’s rates as a result of strength late yesterday afternoon.

10-year Treasury Notes will be sold today and could impact bond prices and mortgage rates. The 30-year Bond sale will take place tomorrow. Results of the auctions will be posted at 1:30 PM ET each day.

There is no relevant economic data scheduled for release tomorrow, except for weekly unemployment figures from the Labor Department. They are expected to announce that 440,000 new claims for unemployment benefits were filed. It will likely take a much larger or smaller figure for this report to affect mortgage rates tomorrow morning. I don’t expect this to have much weight.

The remaining three economic reports will be released Friday morning. This is when we will get April’s Retail Sales data (very, very, very important!), April’s Industrial Production (important) and May’s University of Michigan’s Index of Consumer Sentiment (important).

FLOAT or  LOCK

If I was closing on a Home Mortgage in the next 0 to 15 Days – LOCK

If I was closing on a Home Mortgage in the next 15 to 30 Days – LOCK

If I was closing on a Home Mortgage in the next 30 to 60 Days – LOCK

If I was closing on a Home Mortgage in the next 60+ LOCK

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

  • Are you a possible Massachusetts First Time Homebuyer?
  • Do you have a Real Estate client inquiring about current Mortgage Rates?
  • Do you have any Refinancing questions?
  • Should you be thinking about Refinancing out of your ARM (Adjustable Rate Mortgage)?
  • Have your Real Estate clients been Pre Approved?

bc@SmarterBorrowing.com 617.771.5021

Credit: Bloomberg, Yahoo Finance, Mortgage News, MBS Quoteline, WSJ, NY Times

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We are thrilled to have Sheira MacKenzie, a Certified Mortgage Planner with Fairway Mortgage in Needham, MA, who is here to guest blog about the new, tighter Fannie Mae lending underwriting guidelines on adjustable rate and interest-only loan programs. You can contact Sheira at 781-719-4673 or by email sheiram@fairwaymc.com. Her website is www.sheiramackenzie.com.

Overview Of Changes

Sheira MacKenzie, Fairway Mortgage

For the first time this year, Fannie Mae announced significant updates to its mortgage underwriting guidelines. The changes include strict new ARM qualification standards, the elimination of a once-popular 7 year balloon loan product, and tighter rules for interest only mortgages.

Fannie Mae made its official announcement on April 30, 2010.  The changes will roll out over the next 12 weeks.

These changes are intended to ensure that shaky borrowers can afford an adjustable rate mortgage not only during the first fixed term, but once the rate adjusts even higher.

Borrowers Need More Affordability Muscle For Their ARMs

The first guideline change is tied to ARMs of 5 years or less. This is a huge change which will really impact the ARM market. Mortgage applicants must now qualify based on a mortgage rate 2% higher than their note rate. For example, if your mortgage rate is 5%, for qualification purposes, you must be able to afford a 7% interest rate. The elevated qualification payment will disqualify borrowers whose debt-to-income levels are borderline.

Adjustable Rate Mortgages are still a great product… for the right consumer. Today, it is critical to have a team of experts to help borrowers to determine the right loan strategy for their needs. In Massachusetts, we see slightly higher incomes, but consumers need to be aware of their overall monthly obligations prior to applying for a loan. Take your gross monthly income and multiply it by 35%. If your new housing payment (including taxes, insurance, or condo fee) plus your car, credit, and other loan payments is higher than that number, you could be over-extending yourself in the eyes of investors today. Get introduced to a seasoned mortgage expert who can review your credit and monthly obligations with you, and be sure to check with your financial planner prior to embarking on the approval process. Together you can determine if you are best suited for an ARM or fixed rate as well as the best loan strategy for your short and long-term goals.

Pop Goes The 7 Year Balloon Program

The second change is Fannie Mae’s elimination of the standard 7-year balloon mortgage.  Balloon mortgages were popular early last decade.  Lately, few borrowers have chosen them, though.  Mostly because rates have been relative high as compared to a comparable 7-year ARM.

Interest-Only Belt Tightening

Lastly, Fannie Mae is changing its interest only mortgages guidelines. Effective June 19, 2010, Fannie Mae interest only mortgages must meet the following criteria:

  1. The home must be a 1-unit property
  2. The home must be a primary residence, or vacation home
  3. The borrower’s FICO must be 720 or higher
  4. The mortgage must be a purchase, or rate-and-term refinance. No “cash out” allowed.

Furthermore, borrowers using interest only mortgages must show two full years of mortgage payments “in the bank” at the time of closing. Earlier this year, Fannie Mae’s sister, Freddie Mac, announced that as of September 2010, it will stop offering interest only loans altogether.

Between Fannie Mae, Freddie Mac, the FHA, and other government-supported entities, the U.S. government now backs 96.5% of the U.S. mortgage market. So long as mortgage default rates are high, expect approvals for all borrower types to continue to toughen.

Great post Sheira! We welcome you to the ever-increasing stable of guest bloggers on the Massachusetts Real Estate Law Blog. And we can attest from working with Sheira that she is truly a highly experienced, trusted professional, whom any buyer would be fortunate to have on their team.

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Mortgage Guy Brian Cav has his weekly Massachusetts mortgage rate lock advisory. Brian and I were talking mortgages last night at the Boston Real Estate Now Blog first inaugural get together. The circular irony is that bad economic news = lower mortgage rates. But by the same token, bad economic news = less housing sales = less mortgage originations. An interesting Catch-22!

Mortgage pricing has gotten better over the past 24 to 48 hours, and the reason they have gotten better is non US related issues; Greece and economic uncertainty have kept US mortgage rates down over the past week. I would cautiously FLOAT over the next day or two and LOCK in before Friday’s unemployment numbers. Please try not to get to greedy on the beautiful Cinco De Mayo!

The 30 year conventional mortgage rate still remains in the 4.875% to 5.125% range for well qualified consumers. To secure a par interest rate on a conventional mortgage you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount. If you are seeking a 15 year term, you should expect par in the 4.25% to 4.50% range with similar costs but lower FICO score requirements.

Inquire within for current Mortgage Interest Rates. bc@SmarterBorrowing.com 617.771.5021

Economic Data

Wednesday’s bond market opened in positive territory again following more weakness in stocks. The bond market is currently up, which should improve this morning’s mortgage rates by approximately .1250 – .25 in mortgage pricing..

There is no relevant data scheduled for release today, so any afternoon revisions to mortgage rates will likely come from movements in stocks. If the stock markets move into positive territory, we may see bonds fall and mortgage rates move higher. If the major stock indexes move lower, afternoon improvements to rates may follow.

The Labor Department will release its 1st Quarter Productivity and Costs data early tomorrow morning. This information helps us measure employee productivity in the workplace. If employee productivity is rapidly rising, the bond market should react favorably. It is expected to show a increase in productivity.

We also will get weekly unemployment figures from the Labor Department early tomorrow. They are expected to say that 440,000 new claims for unemployment benefits were filed last week. This would be a decline from the previous week, but unless we see a large variance from forecasts this data likely will not have much of an influence on tomorrow’s mortgage rates.

The big news of the week comes Friday when we will get April’s monthly employment numbers. They are expected to show that the unemployment rate stood at 9.7% last month and that 187,000 new jobs were added to the economy. The higher the unemployment rate and the fewer number of jobs added, the better the news for bonds and mortgage rates.

FLOAT or  LOCK

If I was closing on a Home Mortgage in the next 0 to 15 Days – LOCK

If I was closing on a Home Mortgage in the next 15 to 30 Days – LOCK

If I was closing on a Home Mortgage in the next 30 to 60 Days – FLOAT/LOCK

If I was closing on a Home Mortgage in the next 60+ FLOAT

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

  • Are you a possible Massachusetts First Time Homebuyer?
  • Do you have a Real Estate client inquiring about current Mortgage Rates?
  • Do you have any Refinancing questions?
  • Should you be thinking about Refinancing out of your ARM (Adjustable Rate Mortgage)?
  • Have your Real Estate clients been Pre Approved?

bc@SmarterBorrowing.com 617.771.5021

Credit: Bloomberg, Yahoo Finance, Mortgage News, MBS Quoteline, WSJ, NY Times

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Here’s our Mortgage Guy Brian Cav’s weekly report on mortgage rates. I also read an interesting blog post on how Iceland’s Eyjafjallajökull volcano has helped interest rates.

Mortgage rates went up a bit this morning. Why? Because the stock market rallied from an eight session low yesterday. This has been a pretty slow week in regards to economic data up to this point. The 30 year fixed is in the 4.875% to 5.25% range for qualified borrowers. You must have a mid FICO score of 740 or better and a loan to value below 80%. I am still in favor of LOCKing right now because I believe there are a few factors that are pressuring rates higher. The stock market seems likes it is only going to continue to go up plus there are more Treasury auctions on Thursday. These rates are low now… LOCK them in. Yes you should be thinking about refinancing!

Economic Data

Wednesday’s bond market has opened in positive territory despite a lack of economic news. The bond market is currently up, which should improve this morning’s mortgage rates pricing

It’s another quiet day in the markets, particularly in bonds. There is no relevant economic data being posted today. The stock markets are being driven mostly by earnings results. But those reports do not directly affect the bond market or mortgage rates.

Tomorrow morning brings us the release of March’s Producer Price Index (PPI). It will give us an important measurement of inflationary pressures at the producer level of the economy. The core data is more important to market participants because it excludes more volatile food and energy prices. If it shows rapidly rising prices, inflation fears may hurt bond prices since it erodes the value of a bond’s future fixed interest payments, leading to higher mortgage rates. However, a slight increase, or better yet a decline in prices, would be good news for the bond market and mortgage rates.

Late tomorrow morning, the National Association of Realtors will post March’s Existing Homes Sales numbers. A similar report to this one and actually the week’s least important data- March’s New Home Sales will be released Friday morning. Both are expected to show increases from February’s levels.

Also being released tomorrow are the weekly unemployment figures from the Labor Department. They are expected to show 450,000 new claims for benefits were filed last week, down considerably from the previous week. Generally speaking, a higher than expected number of claims would be considered favorable for bonds and mortgage rates.

FLOAT or  LOCK

If I was closing on a Home Mortgage in the next 0 to 15 Days – LOCK

If I was closing on a Home Mortgage in the next 15 to 30 Days – LOCK

If I was closing on a Home Mortgage in the next 30 to 60 Days – LOCK/FLOAT – Tough Call

If I was closing on a Home Mortgage in the next 60+ FLOAT

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

  • Are you a possible Massachusetts First Time Home buyer?
  • Do you have a Real Estate client inquiring about current Mortgage Rates?
  • Do you have any Refinancing questions?
  • Should you be thinking about Refinancing out of your ARM (Adjustable Rate Mortgage)?
  • Have your Real Estate clients been Pre Approved?

Inquire within for current Mortgage Interest Rates. bc@SmarterBorrowing.com 617.771.5021

Credit: Bloomberg, Yahoo Finance, Mortgage News, MBS Quoteline, WSJ, NY Times

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Weekly Massachusetts Mortgage Rate Lock Report

by Rich Vetstein on April 19, 2010

We’re pleased to welcome back our resident Mortgage Guy Brian Cav with his popular weekly Massachusetts Weekly Mortgage Rate Lock Report. (There was a delay in posting this–Brian wrote it last Wednesday–Sorry!).

Way to much to lose than to gain right now with Mortgage Interest Rates!  I still like LOCKing in your Mortgage Rate very soon, especially if you are closing in the next 30 days. I just think there is so much volatility within the Mortgage markets right now…  over the past two weeks I have seen mid day price changes almost every day, that’s unheard of. Mortgage Rates started off the week doing the same thing it did last week… recovering.  Hopefully you gained some back on the rally late last week and earlier this week and LOCKed your rate in.

Inquire within for current Mortgage Interest Rates. bc@SmarterBorrowing.com 617.771.5021

Economic Data

Wednesday’s bond market has opened in negative territory following the release of stronger than expected consumer spending data. The bond market is currently down, which will likely push this morning’s mortgage rates higher by approximately .25 of a discount point.

This morning’s economic data actually gave us mixed results. The Commerce Department said that sales at the retail level of the economy rose 1.6% last month, exceeding forecasts. This is considered negative news for bonds and mortgage rates because consumer spending makes up two-thirds of the U.S. economy. This makes bonds less appealing  and pushes mortgage rates higher.

March’s Consumer Price Index (CPI) was today’s second release, but it gave us good news. The Labor Department reported that the overall index rose 0.1% as it was expected to do. The good news came in the more important core data reading that excludes more volatile food and energy prices.  That can be considered quite favorable for bonds, but the sales data seems to be taking center stage this morning.

The Federal Reserve will post its Fed Beige Book report at 2:00 PM ET this afternoon. This report is named simply after the color of its cover and details economic conditions throughout the U.S. by region. Since the Fed relies heavily on the contents of this report during their FOMC meetings, its results can have a fairly big impact on the financial markets and mortgage rates if it reveals any significant surprises. Generally speaking, signs of strong economic growth or inflation rising would be considered negative for bonds and mortgage rates.

The Industrial Production and Consumer Sentiment are not extremely important Data & Reports mortgage mortgage rates coming out Thursday and Friday of this week.

FLOAT or  LOCK

If I was closing on a Home Mortgage in the next 0 to 15 Days – LOCK

If I was closing on a Home Mortgage in the next 15 to 30 Days – LOCK

If I was closing on a Home Mortgage in the next 30 to 60 Days – LOCK/FLOAT – Tough Call

If I was closing on a Home Mortgage in the next 60+ FLOAT

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

  • Are you a possible Massachusetts First Time Homebuyer?
  • Do you have a Real Estate client inquiring about current Mortgage Rates?
  • Do you have any Refinancing questions?
  • Should you be thinking about Refinancing out of your ARM (Adjustable Rate Mortgage)?
  • Have your Real Estate clients been Pre Approved?

bc@SmarterBorrowing.com 617.771.5021

Credit: Bloomberg, Yahoo Finance, Mortgage News, MBS Quoteline, WSJ, NY Times

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I’m pleased to welcome mortgage professional Brian Cav, the creator of a great mortgage blog called Smarterborrowing.com. Brian was nice enough to give us his weekly mortgage rate report which I’m sure you’ll find interesting.

Mortgage Market

How did the FOMC meeting affect mortgage rates? Pricing actually got a bit better, both benchmark treasury yields and MBS prices improved after the FOMC statement was released. 30 year conventional mortgage rates are in the 4.75% to 5.125% for well qualified borrowers. If you are presently being quoted these mortgage rates and are closing in the next 15 to 45 days I like LOCKing these rates in. Could this small rally extend?

Economic Data

Yesterdays FOMC meeting has adjourned with an announcement of no change to key short-term interest rates. This was widely expected, but the post-meeting statement did cause some discussion. The Fed left the language in the recent statements that indicate that rates will remain near current levels for some time. This is good news for the bond market and mortgage rates as it means that the Fed is still concerned about an economic recovery.

There is little doubt that the Fed has to raise rates sometime in the future. The question is when. Some analysts feel that it has to be sooner than later to prevent other economic issues down the road. The ultimate goal is for the economy to gradually strengthen so Mr. Bernanke and company can slowly raise interest rates. Raising rates too soon could dampen economic activity by making borrowing more expensive for businesses and consumers. However, waiting too long to raise them could let inflation build momentum, leading to a rapid increase in key rates that also undermines economic growth.

Yesterday’s statement pretty much reiterated recent ones that hint the increases will be later than sooner. Some market analysts believe that is a mistake and that rates need to be raised this year. Others think the employment and housing sectors are still too weak to start raising rates. Who is correct? The future will show us, but in the meantime the debate will continue.

The bond and stock markets have improved from where they were before the statement was released. I would not be surprised to see a small downward revision to mortgage rates shortly as a result of the bond market strength. However, many lenders may opt to wait until tomorrow morning’s rates to reflect that improvement.

February’s Housing Starts was this morning’s only relevant economic data. The Commerce Department reported that construction starts of new homes fell 5.9% last month. This data is not considered to be greatly important to the markets or mortgage rates, so its impact on this week’s trading has been / will be minimal.

LOCK / FLOAT

If I was closing on a Home Mortgage in the next 0 to 15 Days – LOCK/FLOAT

If I was closing on a Home Mortgage in the next 15 to 30 Days – LOCK

If I was closing on a Home Mortgage in the next 30 to 60 Days – LOCK

If I was closing on a Home Mortgage in the next 60+ FLOAT

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

bc@SmarterBorrowing.com 617.771.5021

Credit: Bloomberg, Yahoo Finance, Mortgage News, MBS Quoteline

Thanks Brian! Hopefully, you’re weekly report will be a regular feature here on the Blog.

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