The Mortgage Advantage

06/11/2024

VA issues temporary fix to allow buyer-paid broker fees
The U.S. Department of Veterans Affairs (VA) today issued a temporary fix that will allow homebuyers using VA loans to pay for their real estate agent’s commission — i.e., the buyer-broker fee.
The change, a result of the National Association of Realtors’ (NAR) commission lawsuit settlement agreement, was anticipated late last month and commented on by Michelle Corridon, the deputy policy director at the VA. She said that a circular would be issued while the agency is engaging in a formal rulemaking process.

04/10/2024

Fasten your seat belts. We are in for a bumpy ride. After last week's better than expected employment numbers, J. P. Morgan Chase CEO Jamie Dimon's prediction of 8% interest rates, and today's surprise inflation numbers, it looks like the possibility of lower mortgage rates this year is dimming.

04/01/2024

I wish this was an April Fool's joke: Mortgage rates have marched upwards after Jerome Powell stated on Thursday that the Fed would be in no hurry to lower the Fed rate. Then Steven Blitz, chief U.S. economist at TS Lombard, told CNBC’s “Squawk Box Europe” that the likelihood of one or no Fed interest rate cuts this year was looking “pretty good.” Blitz said the world stock markets would continue to go higher, however, even if the Fed decides not to impose any interest rate cuts this year.

03/28/2024

A quick snapshot on compensation (or contributions) lenders will allow:

FHA: 6% of sales price
VA: 4% of sales price (VA does not allow Veteran's to pay commissions)

Conventional Loans:

03/25/2024

Can I buy a Dream House?

My clients have asked how Barbie can afford a fully furnished home by the beach, a convertible, why she can travel anywhere, anytime, has a cool wardrobe for every occasion, with no documented income.
Is it because she purchased her dream house in 2021 at a 3% interest rate?
Since that time mortgage rates have lost their grip on reality. Rates continue to bounce around the 6ish to 7ish percent range after flirting with 8% in 2023. Who or what is “fixing” (yes, fixing is the right word) mortgage rates?
The Fed does not set mortgage rates but when the Fed adjusts, rates follow. The ten-year treasury bond is tethered to the 30-year fixed so if the bond increases, so do mortgage rates.
Two years ago, the Federal Reserve began raising rates to combat inflation in order to stop the rising costs for consumer stuff like autos, food, tools, appliances, etc. The campaign proved effective for the overall economy but not the housing industry.
The Fed rate is a fee banks charge to other lenders who borrow against the banks’ reserve liquid accounts. Banks lend that money to lenders so they can finance mortgages, autos, and commercial lines of credit. Today’s rate is around 5.50%. If a home buyer is paying 7.00%, the lender makes an upfront profit of 1.50% on the amount borrowed by the buyer. Lenders make additional money on any upfront fees and interest payments over the term of the loan.
Allegedly the markup is necessary to account for possible risk, for example a foreclosure.
Chase’s gross profit topped a record $158 billion in 2023 (a 22.5% increase over 2022) and Bank of America made $98 billion. Dollars, not pesos. The year-over-year increase is due to higher interest rates charged by the banks.
Banks advertise they are community driven. Seriously? Our communities need affordable shelter. Bank profits could be used for home loans at lower interest instead of lining the pockets of their executives. Jamie Dimon, Chase’s CEO, 2023’s compensation was $36 million. (American.)
As of this writing, Steve Mnuchin, Trump’s former Secretary of Treasury, is putting together investors to buy TikTok for over 60 billion dollars. (American.) Instead, why not use that money to offer affordable mortgages for first time home buyers?
Isn’t it time for another economic model for pricing home loans? If something doesn’t change Oppenheimer may step in and blow up the market. Or the only affordable dream homes will be sold at Target.

02/02/2024

WHAT IS NORMAL?


Much to the soothsayers' amazement, the U.S. Economy has become close to normal according to those who determine the definition of “normal". Jerome Powell, the Fed chair, or the man behind the curtain, did his version of a happy dance when reading the statistics at their first meeting of 2024. Now that the fear of a recession is in the rearview mirror, he did indicate the Fed is not in any hurry to lower the rates.

The Commerce Department reported a surprisingly robust fourth quarter gross domestic product (GDP), a measure of the total value of goods and services produced in the U.S. Which means, businesses and consumers purchased all kinds of stuff from refrigerators to clothes. The annual inflation rate, a percentage increase in the prices of goods and services over the year, stunned with a drop to 3.4% for 2023 compared to 6.5% for 2022. And for the last statistic, the labor market has stabilized displaying more people are working than expected. Our unemployment rate is 3.67%, in line with the labor numbers from December 2019. Not to mention, the stock market has bloated to all time highs.

So why am I not feeling the normal? What could possibly take my Arizona sunshine away? Could it be that the Arizona housing market reads like a moody episode of True Detective, where no one is sure what is going on? Are prices increasing? Decreasing? Are there more homes for sale, or less? Multiple offers-yes, no, sometimes.

The cookie cutter builders are paying up to 3% of the purchase price towards rate buydowns and closing costs, but will not extend their generous concession to outside lenders and insist buyers use their in-house money grubbing affiliates, even if their interest rate is a HALF A POINT higher. The homes they are building are shrinking, but the price per square foot is not. Note to new build buyers: invest in your own home inspection before the wolf comes to blow your new house down.

Mortgage rates have fallen since the first of the year and are close to where they were this time in 2023. Fannie Mae predicted rates will dip slightly below 6% by the end of 2024. So, an entire year of mortgages above 6%?

To forget our woes and enjoy a dinner at a chain restaurant is twice as expensive now. A few years ago, I swore I would never use coupons to buy groceries. Now Safeway and Fry’s apps are on my phone and I can't quit Trader Joe's. The streaming services are charging more to watch our favorite shows, or we have to suffer through commercials - just in time for the Super Bowl.

My happy dance is a twerk with a pivot. Pivoting is the new normal.

01/22/2024

Fannie Mae is optimistic that mortgage rates will dip below 6% by year-end. Year End? 2024? Not sooner?

12/29/2023

ARIZONA SOBER -

Most of us in the industry have become Arizona sober as we say goodbye (some would say good riddance) to 2023.  Not to be confused with California sober which means a person has lost the ability to party like they did when they were thirty. Arizona sober means no lender could have predicted mortgag...

12/11/2023

FHA Loan Limit in 2018: $294,515. Now, 2024 : Maricopa and Pinal County: $530,150, Pima (Tucson) $498,257 and Flagstaff (Coconino) $525,550

Conventional Loan Limit in 2018 $453,100: Now, 2024: $766,250

12/08/2023

https://youtu.be/kd16OXpk34g

TMA CORNER: Be free of 2023, SO MUCH MORE FOR 2024!

TMA CORNER - We are free of 2023, SO MUCH MORE FOR 2024!

11/17/2023

A THANKSGIVING FRAUD STORY..

With all that we have to be grateful for, we can agree on at least one first world problem. Credit.

Credit is something we all need to traverse smoothly through our day. Whether it’s shopping at Trader Joe’s or buying a car or a home (don’t choke on the interest rate) or renting a car. Wait. Renting a car? Yes, pilgrim, you need a credit card. The rental car companies do not accept cash or debit cards. So, if you make an allegedly good adult financial decision to have zero debt and close all your accounts, you may not be able to rent a car. Or get a good interest rate on a mortgage or an auto loan.

Yet, credit fraud connected to the credit cards we are forced to use has increased dramatically over the past five years. U.S. credit cards losses due to fraud in 2022 are estimated at $12.6 billion. Identity theft losses were $43 billion. This does not take into consideration the stress, time, and embarrassment after a heartless thief high jacked your credit. Nothing like treating your client to a Starbucks double pumpkin latte and a barista announcing, loudly, your credit is denied.

I recently experienced a similar incident when I noticed an unwanted Capital One inquiry on my credit. This is what I found in my fraud journey:

We can request one free copy of our credit report annually from each of the three major consumer reporting companies: Equifax, Experian, and TransUnion. Their reports also include inquiries and sources of information. Don’t stop after viewing the credit. Scroll down to previous names in which credit was acquired and company inquiries to verify any inconsistencies.
Place a fraud alert on your credit. Contact Experian at 800-509-8495 and a real person will place a fraud alert on all three bureaus for one year. No credit will be issued in your name unless they verify it is you. The creditor will call you using the phone number on file at the bureaus. Credit freezes will also work but could delay credit acquisition.
If you suspect fraud, contact FTC.gov and submit a fraud report. It is quick, easy and will generate a timestamp. You can also call the police and submit a report with them as well. From what I understand, the police take more time and you will not receive immediate documentation that you have filed a report.
If you suspect identity theft, your credit is at risk as well as your bank accounts. Immediately contact each creditor, each credit bureau and your bank or banks. Contact the police.

Don’t ignore possible suspicious actions or assume it won't happen to you. One of the many things to be grateful for are the tools to help us navigate our lives in today’s world.

Credit Bureau Consumer Affairs Line

TransUnion: (800) 916-8800
Equifax: (800) 203-7843
Experian: (800) 509-8495 or (855) 414-6047

We are grateful for all our blessings. Especially our clients.