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  1. Why is Mortgage Volume Diminishing?

    By on February 3, 2010

    Why is Mortgage Volume Diminishing?

    There are varying reasons that are ultimately affecting the decline in newly originated mortgage loans. Luckily, though, current mortgage rates are not a determining factor. As current mortgage rates remain historically low today, they will eventually contribute to the waning volume as analysts predict mortgage rates will climb as high as 6% one year from now. Nonetheless, mortgage volume is deteriorating now, but why? Two primary reasons for the decline in mortgage volume can be attributed to the new RESPA (Real Estate Settlement Procedures Act) disclosure laws that commenced at the beginning of 2010, along with the increased fees associated with FHA-insured mortgage loans.

    Essentially, the new RESPA disclosure laws require loan originators to provide a Good Faith Estimate (GFE) that clearly discloses important loan terms and all closing costs to their borrowers by providing them with a new HUD-1 settlement statement. As a result, it is anticipated that loans will take longer to close. Additionally, many loans will either be delayed or cancelled altogether. RESPA prohibits certain fees from exceeding 10% higher on the HUD-1 that is presented to the borrower at closing. Otherwise, the lender loses the difference. To avoid such a scenario, many lenders concede they are initially disclosing higher-than-normal fees to their borrowers to prevent the penalty. In the end, closings are expected to take longer than the customary 30 or 45 days. At least for the short term, many mortgage experts anticipate the new RESPA disclosure laws will prevent as many as 25% fewer loans from closing.

    Another noteworthy explanation for the falloff in mortgage volume is the new lending guidelines and fees initiated by FHA. Prompted by the considerable amount of mortgage foreclosures by borrowers with FHA-insured mortgage loans, FHA has instituted new lending guidelines and increased fees in an attempt to produce a monetary cushion that would reduce the likelihood of a taxpayer bailout. Among the changes include an increase to the upfront mortgage insurance premium, currently 1.75% of the loan amount, by 50 basis points to 2.25%. This upfront mortgage insurance premium increase is the second in as many years. Additionally, the maximum allowable seller’s concession will be reduced to 3%, down from 6%. FHA’s January 20, 2010 press release outlines the entirety of the policy changes.

    Especially in the last year or so, FHA-backed mortgage loans have grown in popularity and thus represent a significant percentage of all mortgage loans nationally. Regardless of any financial difficulties FHA is experiencing, they are expected to continue to gain in popularity as refinance opportunities evaporate.

    –Robert Hyder

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    Category: FHA, Mortgage Broker/Banker, Mortgage Rate Trends and Analysis

  2. Reputable Mortgage Lenders are Vital to Financing Your Home

    By on October 12, 2009

    reputable-lender

    When considering a mortgage lender, there is much more to think about than just the current mortgage rate. First and foremost, finding a reputable lender that you can trust should be your highest priority. In all probability, a mortgage loan is the biggest investment you’ll ever undertake. You shouldn’t just trust anyone with that responsibility.

    So how do you find a reputable lender? You need to do your homework on this one. First, ask someone you know who already has a mortgage loan who they worked with. Don’t simply accept this recommendation, as there are many reputable lenders in the industry. Ask another homeowner who they used. Then take each recommendation and expand upon them. Contact those lenders and ask them for referrals of their own. The best in the business won’t hesitate to give you names and phone numbers of clients they’ve serviced. Contact these people and see what they have to say.

    The U.S. Department of Housing and Urban Development (HUD) also has a great link for those shopping for a mortgage loan. HUD’s web site will show you how to get the best mortgage loan, regardless if you’re a first-time homebuyer or you simply want to reduce your monthly mortgage payments by refinancing your existing mortgage loan into a lower mortgage rate.

    After you’ve done your initial research, review the list of mortgage lenders you have compiled and interview them. Whether it be over the phone or in person, if a lender deserves your business, they will certainly take the time to get to know you. The three most important things to look for in a mortgage lender are:

    •    Consumer Feedback
    •    Service Reputation
    •    Trustworthy Image

    Longevity in the industry, particularly in these turbulent economic times, is also a vital piece to finding a reputable mortgage lender. If they’ve been able to weather the current financial storm, in all likelihood, they’ve done things the right way from the beginning.

    –Robert Hyder

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    Category: General, Mortgage Broker/Banker, Mortgage Rate Trends and Analysis

  3. Renting versus Owning: The Scales Are Tipping to Ownership

    By on August 26, 2009

    rent-or-buy

    For most, the biggest part of the American dream is owning a home. For those Americans who are currently renting, the scales are beginning to balance and shift toward homeownership in the great debate of whether to rent or buy a home. Besides building equity for the future, the three major components that are tipping the scales in the favor of homeownership are the declining values of homes, historically low mortgage rates and the federal government’s $8,000 tax credit for first-time homebuyers.

    For an additional $221 (estimated per an Associated Press analysis of 45 metro areas for the first quarter of 2009), renters can buy their own home. With the gap between a median-priced home and a median rent down to $221 from $777 just three years ago, this realization could signify a quicker conclusion to the national housing crisis if renters start buying up available housing. Some areas of the country have an estimated gap of approximately $100.

    As home values have continued to decline over a two-year period, the timing couldn’t be better for renters to delve into the realm of homeownership. The National Association of Realtors recently reported that the median home price in the United States peaked in 2006 at just above $230,000. Today, the median home price has fallen over 25% to well below $175,000.

    If this weren’t enough, current mortgage rates are still hovering near historic lows. Federal Reserve Chairman Ben S. Bernanke recently stated that he expects current mortgage rates to remain “exceptionally low for an extended period.” But don’t wait too long, as rates unexpectedly skyrocketed last month, but have since settled a bit.

    In addition to the historically low mortgage rates, first-time homebuyers can take advantage of the $8,000 federal tax credit. Only available until November 30, 2009, this tax credit can be utilized immediately, rather than waiting to file taxes at the beginning of 2010. It is important to note that this tax credit does not have to be repaid, unlike the tax credit from 2008 that was more comparable to an interest-free loan that must be repaid through tax returns over a 15-year period.

    So if you’re currently renting, don’t just throw your money away on rent. You owe it to yourself to at least take a look at the possibility of owning your own home.

    –Robert Hyder

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    Category: Adjustable Rate Mortgages, Condominium, Credit Score, Current Mortgage Rates, FHA, Fixed Rate Mortgages, General, Mortgage Broker/Banker, Mortgage Insurance, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Purchase, Stimulus

  4. Mortgage Broker or Mortgage Banker who will get you the best deal??? Good news, we are both!!!

    3 By on August 18, 2009

    Mortgage Broker or Mortgage Banker?tms-mortgage-broker

    Every day our mortgage consultants face questions from new customers about the nature of the mortgage business and TMS’ place in it. Inevitably, in one of our initial conversations with new (and even repeat) customers we are asked the same couple of questions: “Are you a Mortgage Broker or a Bank? and Why are your current mortgage rates better than everybody else’s?” The answers to these two questions are intertwined and are actually a big reason for the continued success (and even growth) of TMS even in this challenging economic climate.

    Mortgage Brokers

    First let’s quickly review the sources for new mortgage loans that exist in the market today. A consumer has several outlets for current mortgage rates these days and while all sources sell essentially the same products; the consumer will find wildly varying mortgage rates and fees depending upon the channel they choose. I’m sure everyone is aware of the fact that you can walk into their local bank branch and apply for a mortgage. This is referred to as a Retail channel. All of the large national banks (B of A, Chase, Wells Fargo, etc) have these Retail channels. In addition to Retail, most of these banks have what they refer to as Wholesale channels. This is where Mortgage Brokers sell the large bank’s products and use the large bank’s money to close the loan. In a Wholesale situation, Brokers are truly just middle men who originate loans for another entity. They have little risk since someone else underwrites and funds the loans. In addition to the Retail and Wholesale channels, most national banks have a Correspondent channel as well. A Correspondent lender will still sell the large bank’s products and typically will have them underwrite the loans as well but will close with their own money. This (closing with your own money) may seem like a small distinction but shifts enough of the risk from the large bank to the “Correspondent” that the rates provided will typically be better than both Retail and Wholesale channels.

    Mortgage Bankers

    Lastly, there are Mortgage Bankers; those who not only underwrite their own loans but close and fund mortgage loans. These complete mortgage loans are then sold to either one of the large banks or directly to Fannie Mae or Freddie Mac. The Mortgage Bank assumes all the risk for these loans and therefore will get a better price because there are a fewer players in the mix that need to hedge for the risk. It is for these reasons that a Mortgage Banker will almost always have the best rate available in the marketplace.

    So you ask, what does all this mean for me? Well, first of all it means that the consumer should always ask their mortgage professional where their company falls in this spectrum of providers. You may have a great relationship with your local bank, but they typically will have some of the least competitive rates in the market. Similarly, the Mortgage Broker whose name you get from your neighbor may well be a really nice guy but he simply will not be able to compete rate-wise with a Correspondent lender or a Mortgage Banker. Brokers simply don’t have access to the best mortgage rates on a day to day basis. This is where TMS separates itself from the competition. The key to providing the very lowest current mortgage rates is to cast the widest net. As a full spectrum lender, TMS not only has the ability to look at the Wholesale and Correspondent channels of some of the nation’s largest banks but to actually act as a Mortgage Banker on loans as well. This ability allows us to offer industry leading pricing as well as a product mix that is as complete as possible, meeting the needs of all types of borrowers.

    To find out what these advantage mean for you and your mortgage needs contact one of our mortgage consultants today.

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    Category: Current Mortgage Rates, Mortgage Broker/Banker, Mortgage Interest Rates

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