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BANKS RESUME TIGHTENING MORTGAGE GUIDELINES..

11-11-11
Lori Blank

11/10/2011 By Leave a Comment

Mortgage guidelines get tougher

As part of its quarterly survey to member banks nationwide, the Federal Reserve asked senior loan officers whether last quarter’s “prime” residential mortgage guidelines have tightened, loosened, or remained as-is.

A “prime” borrower is defined as one with a well-documented, high-performance credit history; with low debt-to-income ratios; and who chooses to finance a home via a traditional fixed-rate or adjustable-rate mortgage product.

After a 2-year easing cycle, the nation’s biggest bank banks report that they’ve reversed course, and are raising the bar on mortgage approvals.

For the period July-September 2010, 88% of responding loan officers admitted to tightening their prime guidelines, or leaving them “basically unchanged”.

If you’ve applied for a home loan of late, you’ve experienced this first-hand.

High delinquency rates and defaults since 2007 have caused the banks to rethink what they will lend, and to whom. As a result, today’s mortgage lenders scrutinize assets, incomes, and credit scores to make sure that nothing “slips by”.

For today’s home buyers and would-be refinancers, the mortgage approval process can be challenging as compared to how it looked just 18 months ago.

  • Minimum credit scores requirements are higher today
  • Downpayment/equity requirements are larger today
  • Debt-to-Income ratio requirements are more strict today

In other words, although mortgage rates are the lowest that they’ve been in history, fewer applicants can qualify. And, with more the housing market still in recovery, it’s likely that guidelines will tighten again in 2012.

Therefore, if you’re among the many people wondering if it’s the right time to buy a home or refinance, consider that, although mortgage rates may fall, approval standards may not.

The best rate in the world won’t matter if you’re not eligible to lock it.

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Simple explanation of the Fed's Vote on Fed Funds Rate...

11-03-11
Lori Blank

Wednesday, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.

The vote was nearly unanimous, with just one dissenting voter. There were 3 dissenters at each of the FOMC’s last two meetings.

In its press release, the Federal Reserve presented an improved outlook for the U.S. economy, noting that since its last meeting in September, there’s new evidence that the economy “strengthened somewhat” in the third quarter.

One example cited is that consumer and business spending continues to rise while inflationary pressures on the economy remain modest. This indicates controlled growth — a plus in a recovering economy.

The economy remains slowed by a number of factors, though, as noted by the Fed :

  1. “Continuing weakness” in the labor market
  2. Softness in commercial real estate
  3. A “depressed” housing market

In response to mixed economic conditions, the FOMC opted to “do nothing” today; it introduced no new monetary policy, and revised none of its existing market stimulus. The Fed re-iterated its plan to leave the Fed Funds Rate in its current range near 0.000 percent “at least until mid-2013″ and affirmed “Operation Twist” — the program in which the Fed sells Treasury securities with a maturity of 3 years or less, and uses the proceeds to buy mortgage bonds with maturity between 6 and 30 years.

Mortgage market reaction to the FOMC statement has been negative this afternoon. Mortgage rates are rising because analysts expected the Fed to launch new, bigger stimulus plans. It didn’t. Rates may drift higher for the new few days, too.

Therefore, it today’s mortgage rates fit your household budget, consider locking in a mortgage rate. Mortgage rates are very low right now, relative to history. It may not last.

The FOMC’s next meeting — its last scheduled meeting of the year — is December 13, 2011.

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Adjustable Rate Mortgages Starting To Adjust Higher

09-13-11
Lori Blank
09/13/2011 By admin Leave a Comment ARM adjustments creeping higher For the first time in a year, homeowners with adjusting mortgages are facing rising mortgage rates. The interest rate by which many adjustable-rate mortgages adjust has climbed to its highest level since September 2010, and looks poised to reach higher. This is because of the formula by which adjustable-rate mortgage adjust. Each year, when due for a reset, an adjustable-rate mortgage’s rate changes to the sum of fixed number known as a “margin”, and a variable figure known as an “index”. For conforming mortgages, the margin is typically set to 2.250 percent; the index is often equal to the 12-month LIBOR. LIBOR stands for the London Interbank Offered Rate. It’s a rate at which banks lend to each other overnight. Expressed as a math formula, the adjusting ARM formula reads : (New Mortgage Rate) = (2.250 percent) + (Current 1-Year LIBOR) LIBOR has been rising lately, which explains why ARMs are adjusting higher as compared to earlier this year. There has been considerable stress on the financial sector and LIBOR reflects the uncertainty that bankers feel for the sector. LIBOR last spiked after the collapse of Lehman Brothers in 2008 amid global financial fears. Analysts expect LIBOR to rise into 2012 because of bubbling concerns in the Eurozone. Despite LIBOR’s rise, though, most adjusting, conforming ARMs are still resetting near 3 percent. For this reason, homeowners with ARMs may want to consider letting their respective loans adjust with the market. This is because an adjusting mortgage rate near 3 percent may be better than what’s available with a “fresh loan” — even as 5-year ARMs rates make new all-time lows. Unlike a straight refinance to lower rates, an adjusting loan requires no closing costs, requires no appraisal, and requires no verifications. So, if you have an adjustable-rate mortgage that’s set to reset this season, don’t rush to refinance it. Talk to your lender and uncover your options. Your best course of action may be to stay the course.
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After A Pause, Mortgage Guidelines Resume Tightening..

09-08-11
Lori Blank
09/08/2011 By admin Leave a Comment Mortgage guidelines tighteningMortgage guidelines appear to be tightening with the nation’s largest banks. In its quarterly survey to senior loan officers nationwide, the Federal Reserve uncovered that a small, but growing, portion of its member banks is making mortgage approvals more scarce for “prime” borrowers. A prime borrower is described as one with a well-documented payment history, high credit scores, and a low monthly debt-to-income ratio. Of the 53 responding “big banks”, 3 reported that mortgage guidelines “tightened somewhat” last quarter. This is a tick higher as compared to prior quarters in which only 2 banks did. 46 banks reported guidelines unchanged from Q1 2011. When mortgage guidelines tighten, it adds new hurdles for would-be home buyers. Tighter lending standards means fewer approvals, and that can retard home sales across a region. Just don’t confuse “tighter standards” with “oppressive standards”. While it is more difficult to get approved for a purchase home loan in 2011 as compared to 2006, the same basic rules apply: Show that you have a history of paying your bills on time Show that your income is sufficient to cover your obligations Show that you can make a downpayment And the good news is that, once approved, you’ll benefit from some of lowest mortgage rates in history. Last week, the average 30-year fixed mortgage was below 4.250% for buyers willing to pay points, and the average 5-year ARM was below 3.000%. The 15-year fixed rate loan was similarly low. For as long as delinquency rates remain high, expect mortgage guidelines to continue to tighten through the rest of 2011 and into 2012. Therefore, if you’re a “fringe” borrower looking at a purchase in the fall or winter season, consider moving up your time frame. Changing guidelines may render you ineligible for a mortgage.
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How To Weatherize Your Home With Caulk

08-29-11
Lori Blank
With seasons changing, it’s a good time to look at weatherizing your home. Whether you live in a single-family home, a multi-family property, or a condominium, your home has windows and, through those windows, air escapes. Even with your windows closed. In this brief tutorial from Lowe’s, you’ll learn how to use caulk to seal the gaps between your windows and doors and their respective framing to keep your home’s inside air in, and the outside air out. Weatherizing your windows and doors is a 3-step process: Find the air leaks Clean the surface of existing caulk and debris Seal surface with new caulk, and clean-up As shown by the video, there are no technical skills required to repair and replace your home’s caulking. It may require a little bit of elbow grease, however. And, depending on your windows’ locations, use of a ladder may be required. If you’d like professional help weatherizing your home, please ask me for a referral.
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