Dave Andrews

Here's another current observation from Your RED-Headed, Mortgage Guy

YES, the Mortgage Disclosure Improvement Act of 2008 comes to haunt us on July 30th.

Early disclosures are required for "any extension of credit secured by the dwelling of the consumer". Not that we in the mortgage business weren't already required to provide a Good Faith Estimate and a Truth in Lending form within three business days, we are now bound by other restrictions with this law.

The earliest a transaction can possibly close is SEVEN days AFTER the initial closures have been ISSUED by the lender (delivered by mail, e-mail or in person). This is assuming NO re-disclosure is required - let me discuss that.

Mortgage Lenders are now required to RE-DISCLOSE if the APR changes by more than .125% (whether it's bad or good), if the fees and charges change by more than 10% or there is a change in loan terms. THREE business days must pass in the event of redisclosure.

The three business day waiting periods begin when the consumer actually receives them. (I try to meet with my clients, so that I can hand them the disclosures directly.) When sent by e-mail, which we at Landover do over a secure line with encrypted e-mail, we are notified when e-mail is received.

Just to add to the fun, NO MONIES can be collected from the borrower, with the exception of a "bona fide and reasonable" credit report UNTIL they receive the initial disclosures. Another exception to this rule is in regards to collecting for an appraisal up front. Up-Front appraisal fees can be collected if the loan application is taken in person and the disclosures are distributed at that time.

On a side note, HVCC (our lovely appraisal CODE), requires the borrower receive a copy of the appraisal three days prior to closing.

I'll keep you posted when our next set of changes come to market. Until then, have a GREAT day!

Here's a current observation from Your RED-Headed, Mortgage Guy,

May was the third month in a row for stock market gains. Stocks have been appreciating as the credit freeze and bank liquidity crisis has eased, while a growing number of economic indicators have signaled a marked moderation in the pace of the economic decline. As one would imagine, this has not helped rates.

As the pressure for higher mortgage rates has increased in recent weeks, investors have speculated that the Fed would step in to "defend" certain interest rate levels, but that hasn't happened. This week, Fed officials explained that their mortgage-backed securities (MBS) purchases are designed to support the mortgage market and not to set rates. Disappointed that the Fed hasn't increased its quantity of asset purchases, investors sold MBS this week, and mortgage rates moved higher.

A number of factors have been developing which typically push interest rates higher. The coming supply of debt needed to pay for government programs will compete for investor funds. Despite strong demand for this week's large Treasury auctions, investors are concerned that higher rates will be required in the future. In addition, an improved economic outlook has made investors more willing to move funds to riskier assets and away from safer assets such as bonds. It also means that higher inflation may be a concern sooner than previously expected.

The difference between short-term and long-term rates reached record spreads during the week. With the Fed-controlled fed funds rate close to zero, short-term rates remained low. Long-term rates, which are market-controlled and influenced by investor expectations, rose significantly. A wide yield curve spread is often found during periods when the economy is strengthening.

Although higher rates may dampen the housing recovery, if one is indeed occurring, agents and originators should remember that rates are only part of the "home buying equation". Many houses are now more affordable, families are saving money now and may have more for a down payment, and rates are still relatively low.

Fence-sitters may be jeopardizing their chances at Historic low interest rates. As we enter June, it's REMINDER time that there are ONLY 6 months left for the $8,000 Tax Credit. It's hard to believe as we enter the Summer buying season that opportunities may be running away from us. HOWEVER, we still have GREAT low rates AND we still have the first-time homebuyers $8,000 Tax Credit available.

HAVE FUN & STAY TUNED!

Hello Everyone - Dave Andrews your RED-headed Mortgage Guy with something notable,

Periodically, things happen in the market that need some explainin'. Today is one of those days.

If you haven't heard the last 48 hours has not been very kind to interest rates. Two days ago I was

quoting 4.875% (5.1% APR) on a 30 year fixed rate conventional loan. Today I'm quoting 5.375%

(5.55% APR).

As I have said in recent sales meetings, when rates decide to move up it will be quick & ugly. What

we've seen the past few days may be the beginning of higher rates. HOWEVER, there still is some

ugly news regarding the housing industry. Today it was announced that 12% of homeowner's with

a mortgage are either late on their house payment or in foreclosure. That doesn't signal a recovery

to me.

Also, I think it's funny that the media says that unemployment claims are slowing. This comes in the

face of GM preparing to file for bankruptcy. It was also announced that the unemployment rate will

rise in May and will reach 10% by the end of the year. Does that sound like good news to anyone?

It's amazing that "analysts" see unemployment claims slowing, did they ever think that you can only

lay off so many people before there aren't any more to lay off or you don't have a workable company.

Read the views of the market below - VERY INTERESTING.

The Obama administration is facing its another test on the housing market. Can it hold? Will it keep mortgage rates low? The Federal Reserve is doing all it can. Purchases of mortgage-backed securities have taken the Fed's mortgage holdings above $350 billion. The spread between mortgage and Treasury yields held below 2.00% while Treasury yields soared, but today the spread gapped wider by - gasp! - 0.30%. It closed at 2.30%, its widest level in months. (In 2003/2004 that spread was closer to 1%, this means banks are hoarding even more money on loans.)

All it took was a little Treasury debt auction, and market psychology turned on a dime. All of a sudden, traders fear that Treasury debt won't be absorbed, China will snub U.S. offerings, and inflation will rear its ugly head. Fear sent mortgages plummeting, down more than a full point yesterday.

Treasury yields leaped in recent weeks - up 0.61% on the ten-year Treasury in the past week alone. Warren Buffett wrote in Berkshire's annual letter in February that when "the financial history of this decade is written...the Treasury-bond bubble of late 2008" may rank up there with the housing bubble of the middle part of the decade. Pimco's chief investment officer, Mohamed El-Erian, was blunt at year's end, saying, "Get out of Treasuries. They're very, very expensive."

Treasuries have lost their appeal. It's no secret that the U.S. budget deficit is exploding from the combination of weak tax receipts and sharply increased spending. Yields are very low by historical standards, the government is issuing huge amounts of debt to fund record budget deficits, and the massive federal stimulus program ultimately may lead to much higher inflation. The government-bond glut is hardly confined to America. Combined issuance in the U.S., Europe, Japan, Canada and Australia could come to $4.2 trillion this year. The yield curve steepens daily, stretching the difference between short- and long-term yields.

Sure the 10-year Treasury could hit 5.5%, but not any time soon. Morgan Stanley thinks that Treasury rates won't shoot the moon, and we agree. Plenty of deflation, weak demand, and slow global growth is in front of us. The economy is turning the corner, but very slowly. The Federal Reserve is working through a program to buy $300 billion of government debt through the end of September. It has already purchased more than $100 billion.

The Fed also has a program to buy $1.25 trillion of agency mortgage securities as part of an effort to depress mortgage rates. Don't fight the Fed - rates could very likely come back down.

Hello, your Red Headed Mortgage Guy, Dave offering some interesting information.

I got this from one of my news sources that I found as an interesting read...ENJOY!

What is the agent/broker on the street saying? "The bigger problem that continues to persist is the expectancy of rates to drop. Last week after the meeting that is all you heard about. ‘Bernanke was a genius.' ‘This will make the banks have to lend.' The banks do not give two hoots. They are calling their own shots and probably laughing as they got what they wanted and no one regulated them. Now they still cannot drop rates because they are under staffed and cannot handle the volume. The big banks tell us to kiss their behinds because their books are more important than saving our economy. We should have let some more of the big banks tumble. This would have at least left some fear in the banking system that no bank is to big. So we are left with tons of people trying to refinance to save money and all they hear on a continual basis is that rates should be getting lower and we are left to tell them, no because the banks are not staffed well enough to handle the volume."

Brokers are wondering if they will become extinct. Frankly, I doubt it. Remember that mortgage investors are "for profit" institutions. If a particular investor, such as Bank of America or Wells Fargo, decides that their wholesale channel brings in an acceptable volume of business cheaply, compliments their other business lines, and contributes to their bottom line for servicing as time passes, they will keep that business channel. If, on the other hand, the investor decides that the risk/reward ratio is not acceptable for the amount of capital involved, they will scale back or dismantle the operation, such as what Citi and Chase have done. Remember that the wholesale line of business actually sprang up in the 1970's and early 1980's to meet the needs of lenders (mostly savings and loans) who didn't have the network to do enough loans. But most S&L's are gone, and as I mentioned yesterday the large investors have huge branch networks to not only handle deposits but also bring in mortgage loans. It still comes down to what makes sense for the bottom line with any investor. The key to this paragraph is that Brokers may not come extinct, however they are being crippled by the lack of money sources.

Landover Mortgage is a Mortgage Banker. We have direct lines with some of the major banks. Give me a call and see how I can help you with your mortgage needs.

Hello, your Red Headed Mortgage Guy, Dave offering some interesting information.

NEW FHA Limits have returned.

Speaking of FHA, remember that Mortgagee Letter 2009-07 establishes the new FHA loan limits set forth by the American Recovery & Reinvestment Act of 2009. Things to note: new loan limits are for FHA loans that receive approval in calendar year 2009, not farther out; changes apply to the 203b (basic loan), 203h (disaster victims), & 203k (rehab loan); the national FHA floor limit remains at 271,050; the FHA ceiling for high value areas is 729,750; lastly the national reverse mortgage limit increases from 417,000 to 625,500. For the limit in your area, check https://entp.hud.gov/idapp/html/hicostlook.cfm

Pierce, King and Snohomish Counties - $567,500

Kitsap County - $475,000

Mason County - $310,000

Thurston County - $361,250

Lewis County - $271,050

FHA treats short sales, deeds in lieu, etc all the same as foreclosures when it comes to guides and they require 3 years before a borrower can qualify for a loan. Fannie has the new short sale guideline that requires 2 years before a borrower can qualify and 5-7 years for foreclosures.

Lenders had a good January, will end up with great February's, and solid March's. After that, it is anyone's guess as pipelines clear up, loans are purchased, and rates perhaps inch downward. Will these volumes continue if rates stay the same? Are underwriting guidelines going to loosen up? "What do you think?" he said sarcastically. As of yet, aside from a couple random things from Fannie (like increasing the number of properties a borrower can own) personally I have seen no sign of anyone loosening up any guidelines. Investors will take their cue from Freddie and Fannie, and, like I said, I have seen no signs that would point to different guidelines, especially since credit risk is one of the key issues bringing the housing market to where it is. And the government is better in dealing with rates then in setting guidelines.

Last week the Fed bought $25 billion in agency mortgage-backed securities - the most since the program began. Almost 50% of the securities were Fannie 4.5's, which generally include mortgage rates from 4.75-5.125%. As I heard in a seminar yesterday if you are buying something at 4.5%, you're not going to sell it at 4.5%. IN OTHER WORDS THOSE 4.5% INTEREST RATES MAY JUST BE A PIE IN THE SKY.

Also, in the seminar yesterday I got this idea on how to turn a negative to a positive...the discussion was about the media and its negative approach to the real estate market. This caught my mind, "How correct has the media been in the past few years?" Remember early 2008 they were saying we are NOT in a recession and everything will be fine in a few months. Now we ARE IN a recession and everything hasn't been fine. Here's my POSITIVE approach - who's the expert you are the media? You have a better pulse on the market then they do. You can now tell your clients home prices are low (don't tell your sellers this), interest rates are at historical lows, and first time home buyers can get an $8,000 tax CREDIT from the government. Who else is going to give you $8,000 in a year from now?

I'll touch base with you soon. More details to follow after March the 4th?