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Adjustable Rate Mortgages Are Still Here! Part 1
By Dave Jefferlone on August 21, 2009

Part 1 | Part 2: Compare ARM with Fixed Rate Mortgages

Adjustable Rate Mortgage (ARM)

- Please allow me to introduce myselfâ€¦

Helloâ€¦can you see me?

Can you hear me? You may have thought I have left the building but I am still here alive, well and kicking.

Look up; I am standing right here in front of you waiving my ARMS up in the air.

I am extending my ARM offering my hand to you to shake your hand.

Freddie Mac just released their interest rate numbers and stated current mortgage rates were at their lowest levels since May, 2009.

Freddie Mac said “The average rate for a 30-year fixed-rate mortgage was 5.12 percent, down from 5.29 percent last week. At this time last year, the average rate for 30-year fixed-rate mortgages was 6.47 percent.

They said “The average rate on a 15-year fixed-rate mortgage was 4.56 percent, down from 4.68 percent last week, according to Freddie Mac”

If you happen to read Freddie Mac’s report way down at the bottom almost forgotten wasâ€¦

Rates on five-year, adjustable rate mortgages averaged 4.57 percent, down from 4.75 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.69 from 4.72 percent. If you do the math here the five year adjustable rate mortgage fell more than the 30 yr fixed.â€¦.

ARM Mortgage Rates:

If you are paying attention you will realize ARM rates are AWESOME!!!

While Freddie Mac’s numbers have 5 year ARM rates about .60 lower than the 30 year fixed rates, here at Total Mortgage, today our rates on a 3/1 arm are @ 1.25% lower than the 30 year fixed, the 5/1 arm is @1.125% lower than the 30 year fixed and the 7/1 is @ .75 lower than the 30 year fixed for conforming loans.

What is an adjustable rate mortgage?

The following is according to the Federal Reserve.

An adjustable rate mortgage differs from a fixed-rate mortgage in many ways. Most importantly, with a fixed-rate mortgage, the interest rate stays the same during the life of the loan.

With an adjustable rate mortgage the interest rate changes periodically, usually in relation to an index and payments may go up or down accordingly.

To compare two adjustable rate mortgages, or to compare an adjustable rate mortgage with a fixed-rate mortgage, you need to know about indexes, margins, discounts, caps on rates and payments, negative amortization, payment options, and recasting (recalculating) your loan. (If any Arm program you may be interested in has negative amortization, which means the principle balance on your mortgage is going up even after making your required payments on time or is susceptible to future recasting run away as fast as you can)

You need to consider the maximum amount your monthly payment could increase. Most importantly, you need to know what might happen to your monthly mortgage payment in relation to your future ability to afford higher payments.

Against these advantages, you have to weigh the risk that an increase in mortgage rates would lead to higher monthly payments in the future. It’s a trade-offâ€”you get a lower initial rate with an adjustable rate mortgage in exchange for assuming more risk over the long run.

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Category: Adjustable Rate Mortgages, Mortgage Rate Trends and Analysis
Current Mortgage Rates and 5/1 ARM Options
By Dave Jefferlone on August 11, 2009

Current Mortgage Rates Continue to Fluctuate

Analyzing the Mortgage Trends:

After a very rough week last week which showed current mortgage rates spike up, yesterday was like a much needed breath of fresh air. Mortgage rates today opened lower fluctuated up and down a little from their opening and then ended up lower then where they opened at. We always appreciate when the interest rates end up lower than where they opened…

Last week saw current mortgage rates rise due to all of the positive news pertaining to home sales, unemployment/employment numbers and also reported earnings from a number or corporations. This news along with many articles from “experts” saying the recession will end in the 3rd quarter of 2009 helped stocks in the DOW, NASDAQ and S&P 500 show significant gains. Today there was not any significant news to push stocks higher. It is believed investors were taking a little profit taking from their stock portfolios in light of last weeks gains and putting those funds into bonds which raised the bond prices and lower the yield, lowered the interest rates

Some random thoughtsâ€¦

If you have a recent Chapter 13 bankruptcy and you are thinking about purchasing a home or refinancing your current mortgage FHA guidelines only require you have been in the Chapter 13 plan for at least 12 months, your trustee shows all of your payments have been paid as agreed and your trustee approves in writing for you to obtain a new mortgage or new financing.

With 30 year fixed rates creeping up to the mid 5 percent, a 5/1 fully amortized adjustable rate mortgage may be a very viable option for you. If you are just graduating with your college degree and entering the job market, buying your first home and think you will or possibly may be relocating within the next 5-6 yrs, why take out a 30 year fixed mortgage when you can still get a 5/1 adjustable rate mortgage in the mid 4′s.

We are all aware of the recent declines in the housing market over the last couple of years. Condominiums have been hardest hit yet they may also present the greatest opportunity or value in today’s market. While underwriting guidelines have been getting a lot stricter and this is especially evident for condominiums, it may behoove you to do a bit of research so your transaction will go a lot smoother and quicker before either buying or selling a condo. Fannie Mae and also FHA have approved condominium projects. Most Fannie Mae programs will also allow a condominium project which is approved by an FHA Mortgage. (Unfortunately if it is approved by Fannie Mae it does not automatically mean it will be approved by FHA although the chance that it will is a lot higher since it has already been reviewed) If you are looking for a condominium to buy, you may want to start looking at condo’s approved on FHA’s site. https://entp.hud.gov/idapp/html/condlook.cfm. You can search by state, city, zip or condo association’s name. Fannie Mae’s approved condo’s (click on the link scroll down, find the appropriate state and click) https://www.efanniemae.com/sf/refmaterials/approvedprojects/index.jsp . If you are selling a condo, you may also want to check and see if it is approved on either of these lists. If it is, it could be a very strong selling point. Please do not get discouraged if your condo project is not listed above. Call one of our experienced loan professionals at Total Mortgage to guide and advise you on the possibility of the condo you may want to purchase being an approved project.

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Category: Adjustable Rate Mortgages, Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis
Mortgage Rates to Rise Over 6%?
1 By Robert Hyder on August 10, 2009

Since early last week, mortgage rates leaped from around 5% to approximately 5.5%, steadily moving toward 6%. Even though the 10-year Treasury rate is back down today, it is certainly not down enough to make up for the huge jump it made last week. As the 10-year Treasury eventually makes its way back to the 4% range, experts believe mortgage rates will move swiftly to 6% and beyond.

As mortgage rates slowly inched up last month, homeowners hoping to refinance lost interest rather quickly. When and if mortgage rates do climb back to the 6% range, it will be interesting to see how the housing market reacts to purchases, as well.

While mortgage rates are still low, existing homeowners need to act now to refinance. Those looking to purchase their first home should act now for two reasons: rates appear to be on the rise and the $8,000 first-time homebuyer tax credit is due to expire on November 30, 2009, just over three months from now.

â€“Robert Hyder

Category: Adjustable Rate Mortgages, Current Mortgage Rates, Fixed Rate Mortgages, General, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Purchase, Refinance, Stimulus
Improvements Coming For Mortgage Disclosures
By Robert Hyder on July 24, 2009

In conjunction with the Obama administration, key Democratic party leaders on Capitol Hill are looking to remove consumer-protection authority from the Federal Reserve and delegate it to a new regulatory agency, yet to be created. In addition, plans are in motion for new rules concerning an overhaul to the timing and content of disclosures for borrowers of first and second mortgages.

These comprehensive changes are geared towards helping homeowners to clearly understand the disclosures associated with their mortgage loans so they can make more informed decisions. Having the consumer-protection authority since 1994, the Federal Reserve has been targeted for unsuccessfully acting on its authority until 2008. By then, it was too late and the housing crisis had its teeth firmly embedded into the American landscape.

The new disclosure proposal would provide borrowers with a simplified document outlining the costs associated with a mortgage loan, along with an unambiguous annual percentage rate (APR). Additionally, borrowers would be provided with a one-page question-and-answer document warning of loan features that may cause risks, such as balloon loans, mortgages with negative amortization and in some instances, adjustable-rate mortgages (ARMs).

Mortgage brokers typically earn their commission on what is called a yield spread premium (YSP). Essentially, the amount of YSP a mortgage broker earns depends on how high or how low of a mortgage rate they sell to a borrower. The new proposal would effectively eliminate yield spread premiums, thus preventing borrowers from being guided toward risky loans that would potentially increase commissions.

â€“Robert Hyder

Category: Adjustable Rate Mortgages, General, Mortgage Rate Trends and Analysis, Purchase, Refinance
Current Mortgage Rates: Don’t Miss the Boat Again
1 By Robert Hyder on July 22, 2009

Still low by historical standards, current mortgage rates are expected to remain “exceptionally low for an extended period.” For millions of homeowners that hoped to refinance into a lower mortgage rate earlier in the year but waited too long as rates rapidly increased from the low-to-mid 4% range to the mid 5% range, these words by Federal Reserve Chairman Ben S. Bernanke should resonate into an unprecedented second chance.

Additionally, first-time homebuyers eager to exercise the federal government’s $8,000 tax credit should also be enticed by the latest news. As more and more homebuyers are brought back to the housing market, the proverbial light at the end of the housing crisis tunnel appears brighter.

Is this truly the beginning of the end of the housing crisis? Ultimately, the sun will set on these historically low mortgage rates. Don’t miss the boat â€¦ again!

â€“Robert Hyder

Category: Adjustable Rate Mortgages, Current Mortgage Rates, Fixed Rate Mortgages, General, Mortgage Rate Trends and Analysis, Purchase, Refinance
Adjustable Rate Mortgages (ARMs) have returned!
By BillSchettler on July 16, 2009

Adjustable Rate Mortgages (ARMs) have fallen out of favor in the last 18 months or so as the fixed mortgage rates have come down to historically low levels but are making a comeback as ARM rates come back up on the fixed products. The ARM also took a beating in the press as it was lumped in with other less traditional mortgage products that were part of the so called “mortgage meltdown”.

The Savings With ARM vs Fixed Rate:
While, it is fair to say that an ARM does not necessarily provide all the security that a more traditional Fixed rate mortgage product might provide, there can be a real rate advantage (which translates to a payment advantage) to taking an Adjustable Rate Mortgage. In the current rate environment the spread between a 30yr fixed rate and a 5/1 ARM can be as much as 1 full point (1.0%). This translates to a savings of more than $110/month on a $200,000 mortgage and more than $225/month on a $400,000 loan. Those are compelling numbers in these erratic economic times.

The vast majority of Adjustable Rate Mortgages function in the same way; the rate is fixed for an initial period and then begins to adjust once the fixed period is up. The amount that the rate can adjust after the fixed period is determined at the outset and is set in the terms of the loan as the “Adjustment Caps”. Adjustment Caps are typically between 2 and 5% (with typical annual caps of 2%). Typical fixed periods for ARMs are 3 years, 5 years, 7 years and even 10 years. You can tailor the fixed period to your specific need. This really is the beauty of the ARM loan â€“ it provides flexibility and cash flow (through lower payments) that is not always possible with a fixed product.

Is ARM right for you?
That is not to say that an ARM is right for everybody and when Fixed rates were in the mid â€“ high 4′s there was no need to consider them. But, as rates begin to climb and the spread between the fixed and ARM products grows, the ARM becomes a viable option for a large number of borrowers. The simple fact of the matter is that while a 30 year fixed mortgage provides a sense of security in that you KNOW what your housing expense will be for the next 30 years, there are VERY few people who can say categorically that they will be in a given home for that period of time. Jobs change, people move, people refi to take cash out, etc. â€“ life is not always â€˜Fixed’. If you are buying a home you know you will not be in as your family grows or you are refinancing a home you know you will be leaving upon retirement or you are in on a career path that requires frequent relocations or any other scenario where you cannot see the future so clearly an Adjustable Rate Mortgage may be the right choice for you.

Talking to an ARM Mortgage Expert
As each individual’s situation differ, you need to contact one of our Mortgage Specialists today to get more information on the potential advantages of the ARM.

Learn more about ARM products:
>> What is Adjustable Loan
>> ARM Mortgage Rates
>> ARM Blogs – Check out our most recent blogs on ARM Products
>> ARM Calculators

Category: Adjustable Rate Mortgages, Refinance
Refinance to Modification Program by PMI
By Darren Daneault on July 14, 2009

Mortgage Insurer PMI is pitching in to help struggling homeowners with their Refinance to Modification Program. The overall goal of this program is similar to that of other mortgage loan modification programs already in place; help homeowners stay in their homes by lowering their monthly mortgage payments. To qualify for this program, an existing mortgage must be insured by PMI. In the Refinance to Modification Program, the mortgage insurance coverage and premium rate remain the same, and the existing insurance certificate is modified to cover the new refinanced loan. Additionally, PMI is not charging any fees to change the existing insurance certificate, giving borrowers a little break. Whether a borrower is modifying their loan with their existing servicer or lender, or a new one, as long as the mortgage insurance is from PMI they can take advantage of the Refinance to Modification Program.

A mortgage loan taken out several years ago, not requiring mortgage insurance may now be underwater (the loan balance is higher than the value of the home). There are already several modification programs in place to help counter this tough situation, including the HARP, but many people argue that the programs are not working fast enough, or in some cases, not working at all. The PMI program is simply one more tool borrowers can use to help fix their broken mortgages. However, unlike the HARP, where a mortgage loan is specifically owned or backed by Freddie Mac or Fannie Mae, as long as the current mortgage insurance is through PMI, the coverage can easily be rolled over into the newly refinanced mortgage. In most cases, this will benefit homeowners, as mortgage insurance is measured and assessed in several ways, like loan-to-value. If a borrower took out a loan several years ago at 85% loan-to-value and now the loan-to-value is 95%, the MI payments would usually be significantly higher on the new scenario.

As always, there are some catches. Borrowers must be current on their existing home loan. The purpose of the new loan must improve the borrower’s financial position- reducing the rate, reducing the monthly mortgage payment, altering the terms or switching into a more stable program (like going from an ARM to a Fixed Rate).

It’s fairly obvious that home values are still declining in many areas in the United States. As homes continue to decline in value, homeowners will be looking for any and all assistance that is available. The recent drop in mortgage rates earlier this year has definitely helped. Even today, rates are still incredibly low by historic standards. Nonetheless, millions of American homeowners are still struggling.

It is encouraging to see companies like PMI (among many others) doing what they can to assist homeowners lower their monthly mortgage payments. PMI has also demonstrated their commitment to help struggling homeowners by providing useful information on their website regarding servicers, lenders, and typical loan modification processes along with tips and solutions regarding foreclosures.

-Darren Daneault

Category: Adjustable Rate Mortgages, Current Mortgage Rates, Fixed Rate Mortgages, General, Mortgage Insurance, Refinance
Jumbo Mortgages, They’re Still Here
6 By Darren Daneault on June 25, 2009

Jumbo Mortgages are still available today, but they are not as popular as they once were. With the economy in shambles right now, it has become more difficult for borrowers to purchase new homes. What an opportunity though; mortgage rates are still incredibly low, and home prices have dropped significantly. It’s no surprise that the jumbo mortgage market has definitely been hit harder compared to the conforming mortgage market, but, the good news is that there are plenty of jumbo mortgage loans available out there if you are in need.
Conforming mortgage rates have always been more favorable than jumbo mortgage rates. However, by historical standards, the jumbo mortgage market has never seen rates as low as they are today. Unfortunately, all of the housing stimulus programs introduced this year did not take the “jumbo” crowd into account. Perhaps the government felt that if someone could afford a jumbo mortgage they probably don’t require the same assistance as the â€˜conforming’ homeowner. Or, maybe the lack of stimulus in the jumbo market is the government’s way of minimizing further risk; by not trying to squeeze people into jumbo mortgage loans who might not otherwise qualify. Thankfully, those days of poor lending practices are behind us, due to the recent increase of mortgage regulation.
It’s unfortunate (and unfair) that some homeowners who carry a jumbo mortgage loan are unable to take advantage of the low interest rates, whether it is due to the home’s loss of value, or other financial hardships. In some areas of the country, the cost of living is much more than other parts of the country, pushing homeowners into the â€˜jumbo’ category by default. The bottom line is that mostly everyone is affected by the recent housing crisis in one way or another.
There are some encouraging signs out there now, that might suggest we will see a huge comeback in the jumbo mortgage market. Some of the major financial institutions have recently paid back TARP money, demonstrating that they are well capitalized. Banks now have money to lend again, or, we at least know that they may be more willing to lend again. At the start of the credit crunch, we saw mortgage guidelines tighten, as lenders wanted to avoid risk. With credit starting to flow more regularly, we may very well see the same guidelines (especially for jumbo loans) become more lenient again.
Soon the housing crisis will start to bottom out and eventually home values will return to pre-recession levels. This will help jumbo mortgage holder who have been looking to refinance. We can only hope mortgage rates will remain low for a while. For those homeowners needing a jumbo mortgage in order to purchase a new homeâ€¦well, there’s always the $8,000 tax credit for you. If you need a jumbo mortgage, whether it’s to purchase or refinance a home, you have come to the right place. If you have any questions, the professionals at Total Mortgage can answer all of your jumbo mortgage loan needs!

-Darren Daneault

Category: Adjustable Rate Mortgages, Current Mortgage Rates, General, Jumbo Mortgage, Mortgage Rate Trends and Analysis, Stimulus
Current Mortgage Rates Holding Steady
3 By Darren Daneault on May 8, 2009

Current mortgage rates have remained very low over the past several months. Refinancing is still very popular, and we’ve even seen non-conforming loans make a comeback thanks to jumbo mortgage rates becoming more and more attractive. Over the past few years, mortgage rates spiked a bit during the summer months and then dropped as we entered the fall and winter seasons. Some analysts predict that this year will display the same trend.

It’s hard enough to predict whether the current mortgage rates will be on the rise or decline in the future. Even day-to-day, mortgage rates can bounce around significantly. A borrower’s primary concern when looking for a mortgage is the interest rate since this is typically a 30 year commitment. Here are two chapter summaries taken from the Current Mortgage Rates 101 textbook, to provide a little more insight for borrowers as to why mortgage rates vary on a day-to-day basis.

Shelf Life of rate quotes-
Mortgage rates are adjusted everyday by lenders. More often than not, the rates can be updated several times throughout a day, depending on existing market conditions and volatility. This is the reason why when you are looking for current mortgage rates, you may get several different figures over the span of a day or two. The changes can range in severity, but most of the time the changes are minor. You might call in the morning, and find out a few hours later that the rate is no longer available. On the other hand, you might be able to get a lower rate if the markets improve. Just be mindful that the rate you were quoted on one day may not be the same in the near future.

Competition and Current Mortgage Rates-
You might think that banks want to remain competitive to some degree. This is generally true of most businesses, but during certain times, lenders do not want your business. When lenders have a sudden increase in volume, a common tactic is to temporarily increase mortgage rates. This is to deter business (at least until they catch up on their work), and to offset the cost of having to pay employees to take on the extra volume. Borrowers do need a healthy balance sometimes, especially those who are purchasing a home and need to close by a specific date. It may not do a borrower any good to save 1/8th on a rate if the lender takes several weeks to issue an approval or clear conditions due to their high volume. Don’t fret, if you are primarily concerned with obtaining one of the lowest mortgage rates, there will always be a lender out there to meet your needs.

Now that you have further understanding of how and why current mortgage rates jump around so frequently, you will be better prepared when it comes time to lock in your rate.

by Darren Daneault

Category: Adjustable Rate Mortgages, Current Mortgage Rates, FHA, Fixed Rate Mortgages, General, Jumbo Mortgage, Mortgage Rate Trends and Analysis
A Broken ARM Needs to be Fixed
5 By Darren Daneault on May 1, 2009

I am, of course, referring to an Adjustable Rate Mortgage (ARM).

Pretend you have an ARM now and your rate is around 3.5%. Would it make sense to refinance while rates are still at historic lows, and secure a low Fixed Rate mortgage? Or would it be worth the risk and wait to refinance down the road before the ARM resets? The risk is hoping that mortgage rates will still be low when you’re ready to refinance.

This is the discussion I overheard the other day between two homeowners.

In my humble opinion, there is no valid reason to take such a risk, especially in this economic environment. If your ARM is going to reset in the near future, there is a chance the rate will jump, a lot. Refinancing is the only option to get out of that situation. If average mortgage rates increase to 6% or 7% (this was not uncommon when I entered the industry in 2005), plans to refinance an ARM are moot. Additionally, what if circumstances change in the future leaving you unable to refinance, for example, you become unemployed?

Securing a low Fixed Rate mortgage now will save a lot of money down the road. Think of it as a long term investment. You might not be comfortable paying a little more every month, but it will only be for a few years, or less. At the end of a typical 30 year mortgage, you will have saved thousands of dollars.

A guaranteed low rate now is a lot better than risking higher rates in the future, wouldn’t you agree?

by Darren Daneault

Category: Adjustable Rate Mortgages, Current Mortgage Rates, Fixed Rate Mortgages, General, Mortgage Rate Trends and Analysis