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Is Your Loan Officer Incorrectly Reading In Which Direction Mortgage Bonds Are Moving?

August 16, 2007

As we discuss over and over again, mortgage interest rates are determined by the price of mortgage bonds.  Nothing else, and nothing more.  The challenge in that truth is that mortgage bond pricing is not very accessible to the general public. This includes the press. As a result, the media tends to use a government […]

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A Few Good Reasons To Ignore Your Mortgage Prepayment Penalty

August 15, 2007

Industry trade magazine Inside B&C Lending pegs the 2006 dollar volume of new sub-prime loans at $640 billion.  According to the Real Estate Charts chart above, 78% of those dollars were in 2-year adjustable loans. A loan of this variety is often called a 2/28 (“two twenty-eight”). A 2/28 originated in 2006 will reach its […]

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What’s The True Risk In Mortgage Lending? It’s Anyone’s Guess Right Now.

August 10, 2007

Any security — stock, bond, or otherwise — has a specific risk associated with it.  Based on that risk, an investor decides whether or not the price is worth paying.  If the security is a “good value”, an investor will buy it.  If not, the investor will pass. Until recently, mortgage bonds were considered a […]

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The Week In Review (August 6, 2007) : What To Watch For

August 6, 2007

In a week in which several high-profile mortgage lenders closed their doors, not all news was bad. Mortgages rates for home loans bought by the quasi-government groups Fannie Mae and Freddie Mac actually dropped a bit. If you only watched the news, or market commentary on CNBC, though, you likely have the wrong idea about […]

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What If You Got To The Closing Table And The Money Never Showed Up?

August 3, 2007

Several high-profile mortgage lenders, including American Home Mortgage, closed their doors this week and stopped funding loans.  Others dramatically limited their list of “eligible” borrowers. Many buyers and sellers across the country have been stranded at the closing table without funds this week, only adding to the confusion. Because the story is not getting much […]

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The Biggest Banks Are Eliminating The Most Prevalent Sub-Prime Loan

July 24, 2007

Mixed news from the sub-prime sector, depending on how you look at it. Many lenders discontinuing their short-term ARM products. Washington Mutual, Countrywide and Wells Fargo are among the sub-prime lenders no longer offering the 2/28 mortgage product. The “2/28” is a adjustable rate mortgage in which the interest rate remains fixed for two years, […]

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Trade In Your Automobile For A Larger Home?

July 17, 2007

The Bureau of Labor Statistics says that the average American family spends $614 a month on automobiles.  This includes finance payments, gasoline, repairs, and insurance. Let’s relate that $614 per month to home buying. Based on a 6.500 percent, fully-amortizing mortgage payment, that same $614 yields an equivalent of $97,000 in additional home purchasing power. […]

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How The End Of Credit Score Piggybacking Could Damage Your Credit Rating

July 12, 2007

Credit “piggybacking” used to be a handy way to boost a person’s credit score in order to help them get a home loan approval.  Starting in September, it’s going the way of the Dodo bird. Piggybacking involves linking one person’s strong credit rating to another person’s weak credit rating. By adding the latter as an […]

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Before You Rush To Make Bi-Weekly Mortgage Payments…

July 11, 2007

Before paying down your mortgage balance with extra principal payments, be sure to plan carefully. The biggest risk in lending for banks is that you will suddenly stop paying your mortgage.  In that event, the banks hope that you owe them as little as possible against the value of the home. That way, your mortgage balance […]

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The Week In Review (July 2, 2007) : What To Watch For

July 2, 2007

As expected, Ben Bernanke & Co. left the Fed Funds Rate unchanged at 5.250% last week but that didn’t stop markets from improving slightly overall. Markets were buoyed by a low reading on last Friday’s PCE index, the Fed’s favored inflation measure. Low inflation readings are good for mortgage rates so it’s no surprise that […]

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How To Protect Yourself From Becoming A “Trigger Lead”

June 26, 2007

From the CBS News Video Web site, an interesting story for anyone who’s recently applied for credit. Credit repositories now sell the contact information of people applying for new mortgage loans to other mortgage lenders that want to compete for the business. Called “trigger leads”, an unsuspecting mortgage applicant can have his credit checked by a […]

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Be Wary Of Opinions That Masquerade As News

June 21, 2007

Is “news” always news, or is it masked opinion? When doing research on mortgages, it’s important to pay attention to the objectivity of your research source. Often, a writer will deploy key adjectives, phrases, and/or images that distort an otherwise factual story. This cartoon from clangnuts.com is a terrific example. It implies that interest only […]

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How The Recasting of Interest Only Loans Helps With Financial Planning

June 14, 2007

An interesting feature of interest only loans is that your payment is re-calculated each month based on how much money you are borrowing. The industry term for the re-calculation is “recasting”. When an extra principal payment is made on an interest only loan, the new loan payment is calculated as: (Outstanding Loan Size) * (Annual […]

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What Role Do You Play In This Rising Mortgage Rate Environment?

June 13, 2007

The American Consumer keeps spending. This morning, the monthly Retail Sales report showed a larger-than-expected jump.  Even after stripping out elevated gas prices, the sales increase was more than double the expected amount. The economy surges ahead, fueled by everyday spending, and this does not bode well for the future of mortgage rates. The recent […]

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Are You Eligible To Get Rid Of Your PMI Payments?

May 30, 2007

If you’re currently paying Private Mortgage Insurance (PMI) and have been for several years, it may be time to petition your lender to have the PMI payment removed. Waiting for it to drop off “automatically” may mean you will be stuck with the higher payments for at least five to ten years from your original […]

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Saving A Nickel May Have Cost You A Dime

May 25, 2007

This cartoon by Wiley applies to mortgages in 2007 like it did to stock trading in 1999. The least expensive mortgage options aren’t always the least costly.  A quick look at the Sunday paper’s Foreclosure Notice section can verify that. The right loan at a fair price saves far money money than the wrong loan […]

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One Method To Reduce The Amount Of Sub-Prime ARM Foreclosures

May 23, 2007

The graphic at right comes from The Wall Street Journal and it illustrates something that we all intrinsically know: Sub-Prime ARMs foreclose at a faster pace than all other home loan types. When adjustable rate mortgages reach the end of their “fixed rate” period, some homeowners are unprepared for the upward-adjusting mortgage payments and that […]

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When You Can’t Pay The Mortgage, Pick Up The Phone Pronto

May 15, 2007

According to RealtyTrac, one out of every 783 homes in the United States filed for foreclosure in April.  This is down one percent from March, but up 62 percent from one year ago. If you are struggling to pay your mortgage and have not yet entered foreclosure, the best thing to do is to call […]

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Why “Prime Rate” Is A Name And Not A Number

May 2, 2007

Pop Quiz: Which interest rate is lower?  8.25% or Prime Rate? If you answered anything other than “they are the same”, then you can understand first-hand why banks refer to Prime Rate by name instead of by number. It’s a neat little piece of sales psychology that keeps people from recognizing their true cost of […]

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What’s All That Yellen About?

April 27, 2007

So much for market calm. The mortgage market tanked yesterday when, in response to conflicting data about growth and inflation, San Francisco Fed President Janet Yellen said “watchful waiting” is the Fed’s likely next step. This surprised markets because most expect the Fed to lower the Fed Funds Rate within the next few months. The […]

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