Rate lock advisory for March 1, 2011

Tuesday’s bond market has opened down slightly following stronger than expected economic news. The stock markets initially looked to be moving higher, but have since fallen into negative ground. The Dow is currently down 61 points while the Nasdaq has fallen 18 points. The bond market is currently down 5/32, which will likely push this morning’s mortgage pricing higher by approximately .250 of a discount point.




This morning’s economic news came from the Institute for Supply Management (ISM), who announced their manufacturing index rose to 61.4 last month. That was higher than the 60.5 that analysts were expecting to see, meaning manufacturer sentiment about business conditions was better than thought. This is negative news for the bond market and mortgage rates because it indicates a strengthening manufacturing sector.



The stock markets turned south after Fed Chairman Bernanke’s prepared statement to the Senate Banking C committee was released. Some of the key points addressed concerns about rising oil prices and its impact on overall inflation and falling home prices, both of which threaten the economic recovery. These concerns are not new, but with the recent spike in oil prices and the Libya issue, that topic is in the forefront of market traders’ minds. Fortunately, the inflation worries haven’t driven bond prices lower this morning, but they also have not improved as the major stock indexes have fallen. Accordingly, we may want to proceed cautiously today despite the stock selling as we may see weakness in bonds later today.



There are no important government reports scheduled for release tomorrow morning, but Mr. Bernanke will repeat today’s testimony to the House Financial Services Committee at 10:00 AM ET. Since the prepared statement is unlikely to show any changes from today’s version, it will probably have little influence on mortgage rates tomorrow. However, the Question and Answer portion of the proceedings could bring a surprise or clarification on the Fed’s thought process on monetary policy. Therefore, we do need to watch his words as they have the potential to affect bond trading and mortgage rates.



There are a couple of private-sector employment-related releases due during early morning hours tomorrow that may influence bond trading since the employment sector is a major concern at the present time. However, I don’t suspect these reports will change mortgage rates unless they show a significant improvement or weakening in the labor market.



The Fed Beige Book will be posted at 2:00 PM ET tomorrow afternoon. This report details economic activity throughout the country by region. The Fed relies heavily on this data during their FOMC meetings, so look for a potential reaction during afternoon trading tomorrow. It probably will not cause a major sell off in the stock or bond m markets, but could cause enough movement in bond prices to possibly improve or worsen mortgage rates slightly if it reveals any significant surprises.



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... 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 to be in the best interest of all/any other borrowers.

Bye Bye Bank of America WHolesale Lending

Bank of America announced today that it plans to exit the wholesale mortgage lending business. They state that as part of their “customer driven” business model they have decided to focus on opportunities to “deepen our relationships with existing Bank of America customers" and to offer responsible and competitive mortgage products to new customers. “By responsibly exiting our relatively low market share" (22%) “in the highly diversified wholesale mortgage market. We can redirect critical operational resources to enhance capabilities for consumers to purchase or refinance homes”

So let me get this straight, they think that by limiting distribution of their mortgage products they can somehow help consumers? It seems to me that by limiting access to product they are directly opposing what is in the best interest of consumers.

We have seen this before. In Washington Mutual's “glory days", that is the years before the whole mortgage meltdown, we watched Washington Mutual move in and out of wholesale lending time and time again. Interestingly enough their most profitable years coincided with the years that the majority of the loans they originated were through their wholesale lending relationships. We certainly wish Bank of America best success in this endeavor, after all it is a free country so why not put the squeeze on consumers if you can. Brokers, do not worry, they will be back. In the meantime, Bank of America is not the only game town

This blog was written by Brian Leavitt, Designated Broker of Northstone Real Estate Inc, and Northstone Mortgage.

Brian serves clients within the Northwest Multiple Listing Service. And specializes in residential re sale homes, condo’s and land, and is uniquely qualified as a short sale negotiator holding both real estate and mortgage licenses.

You can contact Brian directly by phone at 800-806-3145 or by email at brian@northstone.net. Click here to view his client newsletter.

Brian is licensed with the Washington State Department of Licensing and the Washington State Department of Financial Institutions License number MLO-114864 and is a member of the Seattle King County Association of Realtors and Northwest Multiple Listing Service.

Lenders Continue To Tighten Programs

As lenders continue to retreat from losses, many mortgage programs are being rapidly modified or eliminated altogether. What this means is the days of easy qualification for the minimum down buyer are numbered, at least for now. As always, the pendulum swings, and these programs will be back eventually. That's the bad news, the good news is that we still have excellent VA financing and, in targeted areas, we have the USDA rural housing program available, both of these loans offer zero down options. Another change we are seeing is revised requirements for mortgage insurance as a response to present market conditions. Because of the difficulty in obtaining mortgage insurance, one of our lenders just sent out a vendor profile eliminating half of the mortgage insurance companies that they will allow us to utilize and some other lenders have eliminated the use of mortgage insurance completely.

Watch for rapid changes as lenders drastically tighten standards for loans on condominiums. Some lenders have withdrawn from the condo market and others, as a response to losses, are moving to a much more conservative position concerning their loans on condominiums. As an example of these revised condo standards, many lenders are now requiring that at least 90% of the total units have been sold and recorded and control of the HOA has been turned over to the unit owners and the project or conversion is complete and not subject to additional phasing or annexation. In the past we could often obtain exceptions to these items but not so anymore. In addition to these changes, we are seeing tightened credit standards including loan-to-value restrictions not to exceed 80% for primary residence or 75% LTV for second homes. As always, there can be no litigation pending within a project or HOA and no more than 15% of the units may be delinquent on their HOA dues for more than 30 days. Some of these requirements are not new, but flexibility has gone away.

This blog was written by Brian Leavitt, a Licensed Real Estate Broker and Licensed Mortgage Broker representing Northstone Real Estate Inc, and Northstone Mortgage.

Brian serves clients within the Northwest Multiple Listing Service.

You can contact Brian directly by phone at 800-806-3145 or by email at brian@northstone.net. Click here to view his client newsletter.

Brian is licensed with the Washington State Department of Licensing and the Washington State Department of Financial Institutions License number 510-MB-19802 and is a member of the Seattle King County Association of Realtors and Northwest Multiple Listing Service.

The Market is What?

Showing homes this weekend I was somewhat surprised when my client asked me "what really is wrong with the market"? After a long thought I told him, perception. This is a difficult time for many people but people are still moving. They are still buying and selling homes. They are still investing in real estate. They still get married and divorced, they are transferred, their families get bigger and they get smaller. People still move. For this client it's a great time to buy. There are some excellent values available and interest rates remain below 5%. There is some concern that we don't know how low home prices will go, but in the meantime people still need a roof over their heads. The stimulus package includes an excellent opportunity for first time buyers with the $8,000 tax credit. The problem with waiting until the bottom of the market is that no one really knows where it is. We will only discover the bottom once the opportunity has passed. So there is no time like the present.

Choose to focus on the positive. One of my mentors once told me "you are six inches away from success" meaning that the six inches that separate your ears is really about your mental attitude. A positive mental attitude leads to enthusiasm and enthusiasm sells. I am not for a minute suggesting that we should be "whistling in the dark", pretending that there are no challenges or problems in this market. What I am saying is that if you want to sell property talk to people that are interested in buying and selling property and tell them the benefits of the market we are in so that they have options. Don't just give in to the media who would like us all to believe that the end of the world is at hand. It's not, at least not for a while. In the meantime, what are we doing to make our clients lives better? What we doing to address our clients' needs? Trust me, they can get all the negative attitude they want just by turning on the news. As for me, I choose to be a positive influence and help my clients find the benefits and succeed in achieving their goals and aspirations.

$15,000 Homebuyer Credit Goes Away

Inman News reports that the proposed $15,000 home buyer tax credit was cut from the economic stimulus package and is headed for a final vote on Friday. The homebuyer tax credit was included in the $838 billion economic stimulus package passed by the Senate on Tuesday but was then scaled back to $8,000 and limited to first-time homebuyers as part of a compromise between the parties. It appears that the $8,000 tax credit reached in the compromise would replace a previously approved $7,500 tax credit which is structured as a loan. Under the new proposal the $8,000 tax credit will only be available to first-time homebuyers, but the good news is that it would not require repayment. In another bit of good news, it looks like this bill will restore higher loan limits for Fannie Mae and Freddie Mac. Inman reports that National Association of Realtors welcomes the idea of the expanded tax credit and estimates that this credit will drive more than 200,000 additional homes sales.

New Good Faith and HUD coming soon to a closing near you!

HUD releases new Good Faith & Settlement Statement HUD's attempt to provide greater transparency in the home buying process clearly shows up in the newly revised Good Faith Estimate (GFE) and HUD Settlement Statement. Although these forms will not be required to be used until January 1st, 2010, it will be interesting to see how many early adopters switch to the new format. According to HUD's press release, this long anticipated mortgage reform will help consumers shop for the lowest cost mortgage and estimate the average savings for consumers will be nearly $700!

Bellevue Market Update

October 31, 2008 Bellevue continues to experience a buyer’s market. More than anything the Bellevue market can be characterized as one of the most stable markets in the nation. Perhaps that is not saying much in light of the market chaos experienced elsewhere, but Bellevue represents an excellent value and, in fact, prices are beginning to trend upward since their low in January. Right now the median price per square foot for single family homes is about $332. There are 772 properties presently for sale and the average market time is about 130 days. With interest rates hovering just under 6% on 30 year fixed rate mortgages many Bellevue homes are quite affordable. If you are thinking of buying don’t hold out for that bargain basement foreclosure. The Seattle PI reported last week that foreclosures are down. “King County had 493 foreclosure filings in September, down 42 percent from August and 13 percent from September 2007, The Seattle area, defined as King and Snohomish counties, had one filing per 1,426 households, putting it 162nd out of 230 areas RealtyTrac monitors -- down from 133rd in August and 147th in July.” The word on the street is that many buyers are holding out until the market bottoms out but there are indications that we are there or beyond. One problem of “waiting for the bottom” is watching the market pass you by on the way back up. The best advice is get to know the inventory, choose the best neighborhood you can afford and negotiate your best “deal.” Remember, in real estate you don’t get what you deserve you get what you negotiate.