Sherri Sherpy

If there is one question that I get asked the most, it is "Sherri, how low will mortgage rates go?" Or another version, "Will interest rates go down further?"

Let me start by saying, THAT is the million dollar question. In the last 3 weeks, I have seen 30 year fixed rates as low as 4.375%, only to jump up to 5.375%. What a wild, wild roller coaster we are on!

I subscribe to many rate and market commentaries, alerts, updates and news. I have been in this industry for nearly a decade. And the Rate Game is the most difficult THING to put my thumb on these days. Nothing makes sense. Statistical data has been blown-out-of-the-water. Experts predict down and then they go up.

There seems to be a lot of buzz waiting for the government to bring the interest rates down to 4.5%. Well, we've been there and lower. Economic data can be major market movers, as we have witnessed with the change in mortgage interest rates several times per day. Some experts predict that rates will continue to fall and others believe our Treasury is going to BUST and rates will sky rocket. What gives?

If that isn't enough, let's take this a little further...inside the workings of the mortgage industry itself. Rates are low...they were REALLY low 2 weeks ago. But now we are seeing some crazy things going on. Fannie Mae and Freddie Mac just announced more LLPA's (loan level pricing adjustments). These are all the "adjustments" that get layered on top of the rate for certain loan scenarios. For example:

• Want to do a cash out refinance? Be prepared for an LLPA.
• Have a credit score under 740? Could mean another LLPA.
• Buying an investment property? HUGE LLPA!
• Buying or refinancing with a 1st and 2nd mortgage? Yep! You're getting it now...another LLPA.

So let's say 30 year fixed rates are at 4.5%. You want to refinance. You have a 699 mid credit score, you need to take a little cash out to pay off a bill and your loan-to-value ratio is 80%. Think you will get a 4.5% rate? Not even close...Unless you want to pay points to cover all those little LLPA's.

To make things even a little more interesting, there is now talk of major lenders beginning to absorb their costs of lost interest rate locks by charging fees. These fees will be "absorbed" in their interest rates, meaning an inflated, higher rate or charging the fee outright. See my blog, What? Mortgage Rates Go Up When They Are Going Down? for more information on this.

If I can offer my 2 cents of advice on the Rate Game, it would be this:

1. If you feel inclined to shop different lenders, do it ahead of time, find a lender or loan officer you trust and stick with that person. Yes, that means conversation, getting a GFE and doing your homework up front. If not, you may end up losing...I have seen it happen on many occasion. Rates can change several times a day. Don't chase 3 or 4 lenders. By the time they all get back to you, rates may have gone up.
2. With that research, make sure you find a loan officer who is current on economic news and has the technology to inform you of possible upcoming rate changes before they happen.
3. Be prepared to lock at a moment's notice. That means, giving your loan officer every conceivable way to get a hold of you. Remember what I said earlier...we are on a roller coaster ride and the ride just keeps getting wilder!
4. If you are refinancing, know what the value of your home is, or at least an accurate estimate. Remember LLPA's? They can hurt when you find out you really have a loan-to-value ratio of 80% and not 50% that you wished for. Also, know what you want to do with your refinance. Is it just rate-and-term? Are you taking cash out? What do your credit scores look like? When you choose your loan officer, have this discussion. Know what your certain set of circumstances are and how those may affect the interest rate. It will save your loan officer from having to deliver the bad news that you really can't get that wonderful rate unless you pay points and it will save you from frustration.
5. This one may sound bold, but here it is, anyway...Don't get too greedy. You may miss the boat all together. If you are waiting for rates to go down to 4.25% without closing costs, you most likely will never move forward. Rates are at a historical low. If it feels right and the payment fits, LOCK !

When most industries are boasting the paperless era, the mortgage industry continues to inundate our consumers with more paper! Every year it seems that we are presented with new state and federal disclosures. What do all these forms mean?

Well, here it is...Everything you wanted to know about mortgage documents, but were too afraid to ask!

The following descriptions are meant to be abbreviated explanations of lending disclosures. Of course, I recommend that you read them in their entirety, ask your loan officer questions where they arise and seek professional counsel should you feel it necessary.

Uniform Residential Loan Application (1003)

The lender uses this form to record relevant financial information about an applicant who applies for a residential mortgage. This form will represent the information shared in the interview concerning residence history, income, assets, liabilities, details of the proposed transaction and declarations about the applicant, his/her intentions and his/her past.

Good Faith Estimate (GFE)

This document is a written estimate of expected closing costs that a lender must provide a prospective home loan borrower. Brokers and lenders are required by law to make as accurate an estimate as they can.

Truth In Lending (TIL)

The purpose of the Truth In Lending Act (TILA) is to promote the informed use of consumer credit by requiring disclosures about its terms and costs in a standardized manner. This document will show you your Annual Percentage Rate (APR) which is the cost of credit on a yearly basis, expressed as a percentage. This is required to be disclosed by the lender and it includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. APR Does not include title insurance, appraisal and credit report.

Borrower's Certification and Authorization

This document affirms your application intentions, its accuracy, consequences of lying, and authorizes your lender or its assignee to verify your application information and modify the method by which your income may be documented for the purposes of loan processing and approval.

Credit Authorization

This document allows your broker/lender to obtain and share your credit report with lenders, investors or other relevant 3^rd parties for the purpose of fulfilling your request for an extension of credit.

RESPA Servicing Disclosure

The Real Estate Settlement Procedures Act (RESPA) requires the lender or mortgage broker to tell you in writing whether it expects that someone else will be servicing your loan (collecting your payments). In this document, you'll find the lender's history of servicing and transferring servicing rights.

4506-T Request for Transcript of Tax Return

This document authorizes your lender to obtain transcripts (i.e. Form 1040 series, Form 1065, Form 1120, Form 1120A, Form 1120H, Form 1120L, and Form 1120S) as well as supplemental filed materials (i.e. Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript) for verification and quality control purposes.

Credit Score Information Disclosure

In connection with your application for a home loan, the lender must disclose to you the score that a credit bureau distributed to the lender used in connection with your home loan, and the key factors affecting your credit scores.

Equal Credit Opportunity Act Notice

The Equal Credit Opportunity Act (ECOA) ensures that all consumers are given an equal chance to obtain credit. This notice informs you of that right and what to do if you feel you've been discriminated against.

Disclosure Notices

There are several elements to this disclosure. It is an affidavit of your intention of occupying the property or not, a description of your rights under the Fair Credit Reporting Act, a reiteration of your rights and redress under the ECOA, a description of your right to privacy, an authorization to your current affiliates to release information to your lender for the purpose of compiling a mortgage loan credit package, an affirmation that your lender has not coerced you to use a specific insurance company and an affirmation that you received a copy of the Consumer Handbook on Adjustable Rate Mortgages, if applicable.

Fair Lending Notice

The Fair Lending Notice outlines what constitutes different forms of illegal bias, prejudice and discrimination and provides contact information to federal agencies for further questions about your rights or whom to contact if you wish to file a complaint.

Patriot Act Disclosure

Federal law requires all financial institutions to obtain, verify, and record information that identifies every customer. This document simply informs you that we'll be collecting the required information to be in compliance with this act.

Patriot Act Information Form

This form gives you the option of which form of identification you'd like to use to satisfy the Patriot Act requirements. Please choose the identification form that is most convenient for you and fill out the requested information.

Net Tangible Benefit...IMPORTANT!

Loan officers in Minnesota are prohibited from brokering or making a loan that does not provide a borrower with a "net tangible benefit." This disclosure outlines that this requirement exists and how the benefit is identified.

Ability to Repay the Loan

Minnesota requires that consideration be given to a borrower's capacity to repay the loan that they are applying for. This disclosure verifies this fact, affirms your income as represented by you or on your behalf to your lender and outlines the method by which they evaluate your capacity to repay the loan. It also serves as a warning that, if you think you might not be able to afford this loan, that you should not proceed with the loan process.

Escrow Accounts

Of late, many less scrupulous companies have disclosed terms of loan offers without representing the complete monthly payment that includes taxes and insurance. This disclosure outlines how an escrow account works and shows our estimate, at this time, of what will be included on a monthly basis in your escrow account.

Whew! Now that's a lot of language! Always work closely with your loan officer, ask questions, read your mortgage documents and make sure you know what you are signing.

Mortgage Rate confusion!!

Here's the question...how low will rates eventually go? This is an interesting question to say the least, in the current times. We are currently experiencing a refinance boom in this country. That's the good news. The bad news: It is expected that at least 50% of all those interest rate locks will fall through. In other words, thousands of homeowners have locked in their rates in hopes to refinance to a better position with their mortgage. 50% of these will not close...due to denials, low home values and a whole slew of other reasons. How does this affect us? Let me explain:

When a consumer decides to lock in their rate, the lender is committing those funds on the secondary market. When these locks expire or don't get fulfilled, the investor charges the lender a fee. With 50% of the rate locks expected to fall through, this equates to big losses for lenders. What can happen? There is speculation that lenders may start charging a FEE to lock in an interest rate to protect themselves from the losses. To the consumer, this may mean an upfront fee to lock or a fee that is incorporated into the rate. So, even though rates may go very low, if lenders decide to charge this fee, the consumer gets to decide to pay the fee or take a higher rate to "bury" the fee.

Unbelievable! It will be interesting in the coming weeks and months to see how lenders respond to the losses of thousands of unfulfilled rate locks. No matter what, the consumer gets to pay. :(

When many of us cannot refinance to take advantage of the historical, low rates due to declining values,

Veterans are afforded some relief.  As they should be! 

If you currently have a VA loan, you are in luck. 

Consider this:

• NO APPRAISAL NEEDED.  It does not matter what the current value of your home is.  We will not require an appraisal.
• NO INCOME DOCUMENTATION.  That is right.  You can refinance your current VA loan into another and NOT supply any income or asset documentation

This is particularly unique when we consider our laws in MN.  One and a half years ago, laws were passed prohibiting any mortgage transactions with no income verification.  In other words, there are no longer any MN mortgages transacted without full documentation of income and assets.  Not true for MN VA refinance loans!

There are only a few guidelines to qualify:

• Must have a minimum 580 credit score
• Must have a current VA loan with no lates in last 12 months
• We must be able to pull a clear CAIVR (meaning you have no delinquent federal debt)

That is it!  If you haven't taken action and taken advantage of the very low rates, it may be a great time to do so now.  What a great way to bring in the New Year by saving some cash!

Ph: 612-363-1106

Email: ssherpy@minnmortgage.com

Web: www.sherrisherpy.com

For nearly 15 years, I have enjoyed this wonderful community. It's great neighborhoods, sense of safeness, friendly people and an overall feeling of peace living here.

And who can forget about the new Culvers moving in! Yummmmm!!

Last evening, I took our puppy, Mic, for a walk (okay, puppy in mind and soul...maybe not so much puppy in size). We stopped along the way to visit with people outside and just enjoyed the beautiful summer evening.

Now, everyone who lives here can tell you how nice our parks are and Mic (puppy) is no exception. He has one particular favorite that we frequent all the time. Well, last night, as in all of our walks, Mic walked patiently...waiting to get to his favorite destination. He knows that when we get there, I will take his leash off and he can run free!

Well, last night was different. There were lots and lots of people at the park. There was a soccer game of small kids. Mic quickly got over the fact that he couldn't run free...better yet! There were kids all over the place! Lots of playmates!

All eyes were on the kids playing soccer...Every parent was cheering their children on...And I thought, "Oh dear, should I turn around and go in a different direction?" I decided to move forward...no one would even notice...I could handle the situation. As we moved through, Mic did not bark, but he so badly wanted to greet his friends. I kept a hold of the leash and as we walked by, I realized all eyes started moving in our direction. The kids stopped playing and the coaches were staring.

"LOOK AT THAT DOG! WHAT KIND IS IT? HE LOOKS LIKE A HORSE! wOW, THAT IS A BEAUTIFUL DOG!"

My fears suddenly turned into large smiles. Mic pranced as if he were a galliant stallion. We both handled the situation like pros. Ane he was very proud. I smiled one last time as we moved on by and thought, "Huh! We just stole the show in Cottage Grove!"