Jumbo Mortgage | Find a Low Cost Loan

Feb 15, 2010 Comments Off

Luxury Homeowners Default at Record Rate

Cross posted on www.FreeRateUpdate.com

Retail sales came out basically flat, car sales have stabilized(aside from Toyota) and job losses seem to be slowing down. But this long running recession is not finished with exacting pain on jumbo mortgage borrowers.

A record 9.6% of homeowners with a jumbo mortgage are behind on their payments or in foreclosure as the housing crisis spreads to borrowers with previously stellar credit records and six figure incomes. And the wave of foreclosures isn't expected to crest until the end of next year as the walk aways from 2004-7 purchases work their way along the lengthy foreclosure process which had been delayed by various state and federal foreclosure moratoriums.

The seriously late payment rate on prime jumbo loans has doubled from this time last year, and now represents the largest share of new foreclosures. U.S. prime jumbo mortgages backing securities at least 60 days late rose to 9.6 percent in January from 9.2 percent in December, the 32nd straight increase for “serious delinquencies,” according to Fitch Ratings.

The worst of the trouble continues to be centered in California, Nevada, Arizona , Florida; recently Oregon and Washington State have been added to the list of hard hit markets. These states account for 46 percent of new foreclosures in the country. There were no signs of improvement. The pain, however, is spreading throughout the country as mid-level and high end job losses take their toll. Aside from job losses lost bonus income and pay cuts were cited by borrowers as factors in their inability to stay current on their jumbo mortgage payments.

With continued economic weakness and property values in most cities declining we highly recommend our fix it and forget it strategy. Lock in a jumbo loan term that meets your specific personal and financial goals. We tend to favor the 7/1 ARM Jumbo Mortgage at 4.50% or the fixed jumbo loan at 5.625% with a 30Y term. These represent an excellent value considering that in three decades we haven’t had jumbo mortgage rates lower than these levels. As always, make it a prosperous week.

Jul 28, 2009 Comments Off

Conforming and Jumbo Rates Move Higher

Last week was a roller coaster ride for mortgage rate watchers. After a nice rally in the mortgage-backed securities market on Tuesday, the par 30 year fixed mortgage rate moved below 5.00% on Wednesday, however by Friday Treasuries and MBS prices had fallen back to Monday 's levels and mortgage rates consequently moved higher. This has been a consistent pattern lately, each time mortgage rates break the 5.00% barrier, they fail to remain below 5.00%. This implies, if you are considering a refinance and have yet to submit a loan application...you should do so to ensure that you are able to take advantage of the periods of mortgage rates below 5.00% (assuming you qualify).

Reports throughout the industry are indicating that the par 30 year conventional rate mortgage is in the 5.25% to 5.375% range for the best qualified consumers and 30Y fixed jumbo loans are at 6.25%. In order to meet the criteria of best qualified you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including 1 point loan. Looking at the national average in this volatile rate enviroment is like looking at last weeks temperature. To get a quote or a custom proposal contact us anytime.

May 21, 2009 Comments Off

Just Stop Waiting for the Perfect Rate

We speak to dozens of folks that are some way or the other waiting for rates to get lower than the 5% 5Y or 5.75% 30Y Fixed 2 million dollar jumbo they were quoted. Of course, who doesn't want a lower cost on something. Especially a budget item that represents roughly 20-30% of household income. But several factors could make waiting a disaster.

Home values continue to fall and your equity is diminished thus resulting in cash required to close. Primarily because loan to value levels in general within the jumbo mortgage market require at least 20% or more equity. Depends on the loan amount and the city/state.

The dollar and US based interest rates start to move higher because of a global view that the US is a riskier place to invest/lend. This has started to happen in the last few weeks. The US Dollar vs a global basket of other curriences has started to fall:

The value of the dollar rose nicely after the currency was viewed as a safe haven in Jan till March. Then the full breadth and scope of the recession(newpression?) plus the enormous costs of the bailouts investors(our creditors) began to move away from holding dollars and investing funds in US invesments.

3. The third largest risk is that all the government borrowing by countries around the world crowd out and soak up funds that normally would be put to work in the mortgage market. Here is the chart for what the US Treasury 10Y is currently going for:

Now, this isn't a disaster yet but today the US Government is having to pay 3.35% for ten year money vs about 2.50% range less than eight weeks ago. The enormous stimulus that congress passed has to be paid for right? The US goverment doesn't have any money. We basically have a line of credit with the rest of the world sitting at 11-12 TRILLION dollars owed now. This works out to about 37k for every man, woman and child in this country. See more here.

If investors/lenders decide that the US is a big credit risk then regular mortgage borrowers could be painted with the same brush and see much higher mortgage rates in the future. If you don't believe me and you want someone with some weight how about the manager of the largest bond group in the world? They manage about $750 billion.

If you don't want to play the jumbo mortgage rate casino game anymore with your house, Contact our office or another mortgage professional and get something done. It is better to lock and be wrong than to ride the interest rate rollercoaster in the coming years and regret it.

Oct 25, 2008 Comments Off

Mortgage Industry will say NO more often.

In a move that will stymie thousands of would-be home buyers and homeowners, Fannie Mae announced another round of mortgage guidelines changes a few weeks ago that will have a huge impact.

Unlike past revisions in which Fannie Mae tightened debt ratio and credit scoring requirements, however, the newest underwriting updates home equity and home buyer downpayments.

This is consistent with the emerging underwriting philosophy that Collateral is King.

No home equity, no downpayment, no loan.

Effective December 13, 2008, Fannie Mae will enforce the following single-family residence restrictions:

Primary residence, "cash out" refinances are limited to 85% loan-to-value

Second home, cash out refinances are limited to 75% loan-to-value

Investment properties cannot be refinanced without a 25% equity position

Each bullet point represents a 5 percent tightening over the previous guidelines.

Now, to be clear, Fannie Mae isn't the only source for mortgage money. The others are comprised by the FHA, the VA, and an innumerable amount of portfolio lenders. To date, these groups have yet to announce similar loan-to-value restrictions.

But, because Fannie Mae (along with Freddie Mac) guarantees almost half of the nation's home loans, it does swing a big stick. Historically, when Fannie Mae gets tight with its money, the other groups tend to follow.

Fannie Mae and Freddie Mac Market Share Starting 45 days from now, qualifying for a conforming mortgage will require more home equity than at any time since 2003.

Now, there are a lot of people sitting around right now, waiting for mortgage rates to fall before buying or refinancing their home.

I'd offer a more prudent idea: Just get on with it already.

None of us can predict what where mortgage rates will go. Recession, inflation, whatever -- it's a big mystery. But, we do know with 100% certainty that guidelines will tighten effective December 13, 2008, and it will prohibit Americans from getting access to mortgages.

We know this because Fannie Mae published it on its Web site.

If you're buying a home or in need of a refinance, consider moving up your timeline. If rates fall after-the-fact, you can always try to refinance into something less expensive. But if guidelines shut you out, there's nothing you can do about in hindsight.

If you know you need a conforming mortgage or a jumbo mortgage, just take care of it. Great low rates don't mean a thing if you can't get qualified. And starting December 13, 2008, the qualifying hurdles are going to be raised.

Sep 23, 2008 Comments Off

The American Empire is Burning:Pull up a chair.

Although I’m sure that, like I, many of you are not at all surprised by the extent of the financial crisis we have seen to date, I’m absolutely certain that most of you are shocked by the extent government’s response.

This decline was inevitable… it was obvious and for years many have taken to writing/blogging and debating it’s various details but could anyone have ever predicted that as a result of this ugly episode the federal government would violate our economic and social system to such an extent?

I know I didn’t… I now see that I was naive.

In anticipation of the decline I had envisioned the outcome many times… Americans tightening belts, losing their jobs and then their homes, increases in crime, a “poverty effect” that would reverse most of our gains from the nineties leaving the country trapped in a vicious-circle pushing us into a long and deep recession always teetering on the brink of depression.

Yet… I suppose I should feel foolish admitting this now… I had always expected that households and firms would be largely on their own to navigate the down-side much as they had the up-side of this historic and nearly multi-decade boom.

I say “largely” because our government has, for generations, had at its disposal many well known tools for engaging tough economic times (unemployment insurance, FDIC, fed funds rate, lender of last resort etc. etc.) and although this bout looked to be fairly severe, they seemed to me to be adequate.

Never did I EVER expect that the federal government would force American taxpayers, and their many generations of descendants, to essentially be the sole bearers of this epic catastrophe.

It doesn’t matter if you were prudent, if you planned, if you resisted reckless behavior or were even thrown to the side, unable to keep up with all the mayhem.

You will now PAY for the aftermath.

And if that’s not enough, you’re not simply being drafted to defend our social system by subsidizing the failures of all the individual ignorant greater fools… you are going to be the FINAL greater fool for the WHOLE system itself.

If congress passes the proposed legislation and the president signs it into law (as is likely), all private financial institutions, even foreign institutions will clean their balance sheets of junk mortgages, credit card debt, car loans, student loans and other nearly worthless assets on the back of your labor.

I want to repeat a point that I made in a prior post.

Many of these private institutions are THE VERY SAME that lobbied hard for sweeping new bankruptcy reforms that now make it harder than ever for individuals to seek shelter during times of personal financial hardship.

If you’re late on your credit card debt, these institutions will hammer you with fees that can, under certain circumstances, eventually exceed the debt itself… if you default they will ultimately sell that debt to a collector that will stop at NOTHING to squeeze you for every last penny.

This bailout scheme will create a massive multi-generational transfer of wealth from the many average American households and firms to the very few wealthy, elite and well connected.

Let’s remember that these actions are coming at a time when our stock markets have declined less than 25% from their prior peaks and absolutely NOT in the context of a calamitous depression.

This is an absolute disgrace and I’m convinced that no other generation before us would have ever conceived of this level of cynical tyranny.

There is no liberty… you are not free… America is truly a collapsing empire with only hollow ideals and empty slogans left to remind us of our once proud ambitions. Don't believe me? Our dollar is down 6% since last Thursday vs the EURO. That is an enormous move in the currency markets. Foreigners don't like what they see, neither should you.

Sep 17, 2008 Comments Off

GOVT In Action: Jumbo Fixed Rates Drop

Mortgage rates dipped over the past few days as investors shunned stocks and purchased mortgage securities backed by the federal government and solid prime jumbo loans.
Borrowers with good credit and a 20% down payment today could qualify for a 30-year fixed-rate mortgage at 5.50% with a one-point fee. That’s down from 6.00% on Friday of last week.
The rate has been trending downward from 6% since the government took possession of mortgage buyers Fannie Mae and Freddie Mac on Sept. 7. Investors now feel comfortable buying those companies’ mortgage securities, and that lowers rates to consumers. The move by the US government has had the needed impact. If you can't save housing you can't save the financial system nor the economy from a financial meltdown/great depression scenario.

However, adjustable rates have improved much more. Bloomberg reports that the international rate banks charge each other for overnight loans, known as the London Interbank Offered Rate or LIBOR, more than doubled and then moved lower as the FED and European Central Bank moved to inject money moving rates to 2.95% as markets were spooked by the bankruptcy Monday of Lehman Brothers and the death rattle of AIG. The meltdown of household names is the best opportunity for people to refinance or purchase as investors want something safe/secure. Nothing is safer in this market than solid credit client's looking for a phenomenal jumbo mortgage rate.

About 6 million U.S. mortgages, including almost all subprime home loans and 41 percent of prime ARMs, are linked to LIBOR, according to First American CoreLogic, Bloomberg reported.

Sep 6, 2008 Comments Off

Avoiding the Jumbo Mortgage Man

How do you avoid paying jumbo mortgage rates on a jumbo-sized mortgage?

You avoid taking your mortgage to a Wall Street lender, that's how.

It's pretty simple when we break it down.

The word "jumbo" is a Wall Street-specific term for home loans larger than $417,000. In certain "high-cost" areas, the number is $729,750.

Lately, rates on jumbo mortgages have been terrible compared to its cousin, the conforming mortgage. Plus, jumbo mortgages carry higher loan fees.

The price disparity is even worse for so-called "Super Jumbo" mortgages. A super jumbo mortgage is similar to a jumbo mortgage, but bigger.

But the thing is, the terms "jumbo mortgage" and "super jumbo mortgage" -- these are conventions of a Wall Street-bound loan. Just because your loan size is over $417,000 doesn't mean that you have be subject to the jumbo and super-jumbo rules.

To avoid them, just make a choice avoid Wall Street mortgage lenders when your loan size exceeds your local conforming loan limits. This means bypassing your neighborhood Big Bank retail branches in favor of a niche banks that harbor no allegiance to Fannie Mae or Freddie Mac.

Finding banks like this isn't always easy, but it's worth the effort. This is because when a lender makes its own rules, its mortgage rates tend to be lower, its downpayment requirements tend to be smaller, and its underwriting process tends to be smoother.

These are all good things when your mortgage is greater than $417,000.

Consider these mortgage scenarios from a sampling of local banks. Each example carries a corresponding mortgage rate in the low-to-mid 6-percent range:

$700,000 mortgage with 20 percent down, primary residence

$1.5 million mortgage with 30 percent down, vacation home

$2.5 million mortgage with 30 percent down, primary residence

Now, compared to what Wall Street lenders are offering, not only are the small bank rates up to 2 percent lower, but they're not accompanied by discount points, either. And that's even giving Wall Street the benefit of the doubt -- most Big Bank lenders won't hardly touch a jumbo or super jumbo mortgage with a 10-foot pole anymore.

The irony here is that wealthiest Americans often have private banking relationships with firms like Chase, Bank of America, and Citi among others but their private banking relationship is ill-equipped to handle the mortgage needs of a high net worth client anymore.

Jumbo and super jumbo mortgage approvals are easier with local banks and lenders as opposed to national ones In 2005, the banks performed admirably for their wealthy clients. Today, not so much.

So, the best way to avoid paying jumbo mortgage rates on a jumbo-sized loan is to get out from Big Bank mentality and get your mortgage funded from somewhere other than Wall Street.

Jumbo mortgage rates are expensive. Niche, local bank mortgage rates are not. If you're a jumbo homeowner and you have a local banking relationship, it may be wise to call your branch to get a better rate quote.

And, if you don't have a local bank to call, know that you can always call or email me. I lend in 42 states and have niche banking relationships in all of them. If you can't find low rates for yourself, I'm happy to find them for you.

Jul 11, 2008 Comments Off

When the Power Goes Out and Other Lessons.

In part of Los Angeles and Orange County we had a power outage that lasted about two hours this afternoon. This isn't Iraq where 40% of the time they have power failures. This is a rare event but it reminded me of the world and people we depend on to go about our daily lives.

Today's home owner or home buyer is experiencing the same level of surprise when they try to get a mortgage loan. Make no mistake about it THIS IS NOT A PROBLEM FOR OTHER PEOPLE. If you are thinking about selling, your buyer has to put 10-20% down now or take a high rate on an FHA loan with a big monthly mortgage insurance payment. It was 0% down two years ago with so-so credit. If you are thinking about refinancing now or some point when you can find the time. Do it now! If you don't have the equity or are 1 point shy on the FICO you are out of luck and stuck with your current loan.

I kid you not, it all matters. The rampant inflation has caused rates to move into the low 6% range on 5 and 7Y ARMs for the most qualified clients with plenty of equity. This is a shock to people that borrowed during the 02-05 period when rates were the lowest level in 50 years. Most of these client's are coming out of 5% rates on adjustables. These adjust against the LIBOR which is now 3.20%. Almost every Prime perfect credit ARM is 2.50% plus the LIBOR index. If you were adjusting today your rate would be 5.70%, not bad but look at this chart and do the math:

Rates move back to the 2006 or 2007 levels and you are at 7-8%+. In order to stop inflation central banks(i.e. the FED) raise rates. Don't be shocked to see HELOCs at 8% in two years and LIBOR at 6%. Why should a person put money in a CD at 3% when inflation is really 5-7%. Do you buy gas or food? Enough said. Rates will go higher to compensate.

Welcome to the new reality of a weak dollar, high inflation, and falling home values. No area in the country is immune to these forces. These winds have a dramatic impact on the loans available even to the most stellar money good borrowers. The new standard for jumbo loans is to have 20% equity minimum. This is for loans that are above the new Fannie Mae "conforming jumbo" limits which differ by area. In most high cost markets it is 729k. Do you have the equity to refinance? Are you close to not having 20% equity in your home? If not you can't refinance unless you bring a check to the table if you are in the jumbo loan market. Otherwise you can have 5-10% equity but now you have to carry mortgage insurance which can run a few hundred hard earned dollars a month.

If you want to check your home value go to realtor.com or redfin.com. Search for a home just like yours. Find similar homes and then find the lowest priced comparable. That is the market. Banks are looking at the lowest comparable home now because it is a falling market. This is called deflation. Home values are deflating like a balloon with a hole in it.

We have seen dozens of client's this month that can't refinance because they don't have the required equity. Their next move is usually to put their home on the market or sit tight and pray to the interest rate gods that their mortgage payment doesn't adjust too high. Don't gamble with your most valuable financial asset and largest liability. Pay attention to your risks and work to get the best possible loan for your situation. If you don't work with our firm, please work with someone competent. Take care and have a great weekend. The American Dream isn't dead we are just having a nightmare scenario. It will pass.

May 29, 2008 Comments Off

Buy vs Rent:Long Time Renter Takes The Plunge

From a recent client discussion:

"The case for renting has been simple enough. House prices rose so high in the first half of this decade that you could often get more for your money by renting. You could also avoid having a large part of your net worth tied up in a speculative bubble. All this time, I have been a renter myself, ... [but] the housing market has, obviously, changed quite a bit since our last move, in 2005....This month, we found a house that we really liked, and we made an offer. It was accepted.I’m still not sure how good our timing was. Based on the backlog of houses on the market, I fully expect that our new house will be worth less in six months than it is today. ...In fact, if you’re now renting - almost anywhere - and do not need to move, I’d probably recommend that you wait to buy. The market is still coming your way. But it’s O.K. with me if our timing wasn’t perfect.
Leonhardt isn't buying for appreciation, and he realizes the price will probably still decline further. He is buying because prices have fallen enough that the intangibles of homeownership (as he and his wife value them) outweigh the extra costs of owning a home compared to renting."

May 3, 2008 Comments Off

Chaos in Luxury Finance. The Other Shoe Has Dropped.

This week we witnessed a dramatic change within the jumbo mortgage and luxury financing space that has broad implications for housing markets across the country. It appears to have started with Wells Fargo on Monday and spread within a day to all investors whether bank, insurance, pension or hedge fund money sources. Remember we had earnings from all banks and insurance companies in the last two weeks. This allowed all market participants to peek under the hood and see that the credit engine is leaking oil.

The market above 1m had become restrictive in the last few months moving to a fully documented income, 720 minimum FICO playing field for most loan scenarios. Lending to the wealthy seemed stable. Then this weeks major crack in the 2m+ market which we specialize in, we knew another shoe had dropped in the credit meltdown. Granted 1-20m property finance is a niche within the 10 trillion dollar mortgage industry. But, the changes forecast major declines in luxury markets as this further decreases the available pool of buyers and will pressure prices.

Program loan to value limits were cut between 5-10% at most investors. We received dozens of calls from brokers, realtors, and loan officers across the country desperatly searching for 20-25% down financing for their purchases that now require 30-35% down or millions in reserves which most clients don't have. Programs are available to put 20% down on property up to 6m but they require 1-3m plus in liquid assets beyond the down payment. It will take a few weeks for this meltdown to be seen in asking prices as housing markets move VERY slowly. Not like your gas station that changes prices every afternoon right before you pull up to fill the tank on the weekend.

As proof of the credit market distress I would like you to consider the 1Y USD LIBOR chart below.

This is May 1st 2007 to May 1st 2008. With hundreds of billions that the European Central Bank and FED Central Bank action in March we had a great move down in LIBOR as they flooded the market with cash in exchange for illiquid securities from banks. Now we have spiked up again and the market is saying that their is huge demand for money and supply is constrained. Lenders are afraid to lend so they are increasing the price. So econ 101 dictates prices must rise hence we have moved up about .75% in the last 30 days. Every borrowing cost is rising yet the FED just cut rates on Wednesday and the market is not responding. Remember the FED rate cuts only matters to banks who can borrow at the window or for your HELOC which is based on prime. The majority of corporate borrowing and 80-90% of adjustable rate mortgages are based on LIBOR. The LIBOR movement has a direct impact on what rate someone gets today and if someone is adjusting now they will move up or down based on LIBOR every 6 months per their jumbo loan contract.

Well another happy piece of news for folks on the sidelines waiting to buy. Enjoy your weekend and someday this meltdown will be over. Just not for several years. It took time to create the largest asset bubble in history and it will take time to deflate back to the fundamentals.

Extra reading for you credit crunch junkies:

The Fed is apparently still worried about the LIBOR, from the WSJ: Central Banks Ponder Dollar-Debt Rate
Central banks on both sides of the Atlantic are debating causes of the surge in interest rates on commercial banks' dollar-borrowing in money markets and considering what they can do about it.A major source of stress has been the London interbank offered rate, or Libor, a benchmark for the rates banks pay on dollar loans in the offshore market. It remains unusually high compared with expected Federal Reserve interest rates...

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