So-called “No Cost Loans” where is the catch?

By Todd Abelson NMLS #180858 on .

There’s a lot of marketing out there to help make some loan-jockey’s phone ring but nothing brings them in faster than the “no cost loan”. I’ve got news for everyone and it’s a secret no one will share with you: There’s no such thing as a no cost loan!

I’ve been in the mortgage business for 13 years and I pay closing costs on my own loans! The last time I checked, neither the Title Company, the Appraiser, nor the Credit Reporting Agencies worked for free. So where does this alleged “no cost loan” jargon come from? I’ve developed and simple yet strikingly easy chart to explain the process.

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In a nutshell, there are only three variables to consider: Loan Amount, Interest Rate, and Cash in/out. Assuming you agree there are in fact closing costs to deal with, you get to pick two sides and the remaining side defines how your costs will be handled.

Examples

1. LOAN AMOUNT: You can increase the loan amount if you have enough equity to roll all the closing costs into your loan; doing so allows you to bring in NO cash at closing. Hence the words ‘no cost loan.’

2. INTEREST RATE: If you want the lowest rate, there will be extra fees called origination fees or discount points. If you’re willing to accept a higher rate, it will be used to cover some or all of the closing costs.

3. CASH: If you’re willing to pay closing costs in cash at closing, you can get the lowest rate and/or loan amount.

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How The Stock Market Rally Was Terrible For Mortgage Rates

By Todd Abelson NMLS #180858 on .

The Dow Jones Industrial Average surged 631.86 points in the last three hours of trading yesterday as traders piled into equities

The Dow Jones Industrial Average surged 631.86 points in the last three hours of trading yesterday as traders piled into equities.

Fueling the rally?  The bond market. 

For as much as stocks gained today, bonds lost.  Including mortgage bonds.  The dramatic sell-off created a huge swing in mortgage rates and erased nearly all of 2008’s rate improvements.

This is one reason why it pays to be aware of your home loan.  That way, when markets change and a doorway to payment reduction opens, you can quickly step through it. 

As yesterday illustrated, with mortgage rates, opportunity is often fleeting.

With stocks poised to rise again today, it should likely happen at the expense of bonds.  Mortgage rates are trending higher, too.

(Image courtesy: The Wall Street Journal Online)

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Why Mortgage Rates Didn’t Fall More When The Fed Made A Surprise 0.750% Rate Cut

By Todd Abelson NMLS #180858 on .

This simplified analogy is similar to what happened yesterday, post-rate cut.  It's why many people that expected rates to fall further were dissappointed.In a surprise move yesterday, the Federal Reserve cut the benchmark Fed Funds Rate by three-quarters of a percent.  Mortgage rates fell only slightly as the surprise quickly wore off.

To understand how the element of surprise works in mortgage markets, think about a Jack-in-the-Box. 

Everybody knows that the clown is coming, they just don’t know how many turns of the crank it will take.  When it pops out, there’s an immediate shock.  Then it’s back to business.

This simplified analogy is similar to what happened yesterday, post-rate cut.  It’s why many people that expected rates to fall further were dissappointed. (more…)

It’s A Good Day To Have Your Mortgage Adjust

By Todd Abelson NMLS #180858 on .

(New Interest Rate) = (Index) + (Margin)

When the Federal Reserve lowered the Fed Funds Rate by 0.75% yesterday, it was in response to economic weakness that mounted since its last meeting December 11, 2007.

By contrast, the mortgage markets meet every day

Because of this, mortgage rates had already “priced in” the weakness to which the Fed was reacting. 

This is why mortgage rates did not fall by the same 0.75% yesterday — they only fell slightly. (more…)

Federal Reserve’s surprise 0.750% rate cut this morning 1/22/2008

By Todd Abelson NMLS #180858 on .

 chart

As promised, last week was heavy on data and on drama.  And mortgage rates continued their slide lower. 

This week, by contrast, is devoid of data and markets are already digesting the Federal Reserve’s surprise 0.750% rate cut this morning. 

Mortgage rates are falling in response, but not because of what the Fed did as much as what the Fed implied by doing it.

The Federal Reserve does not control mortgage rates, per se, but it does exert an influence.  This is because when the Federal Open Market Committee makes changes to the Fed Funds Rate, it is making a broader statement about the health of the economy.

This morning, and in advance of its 2-day meeting January 29-30, the Federal Reserve chopped the Fed Funds Rate by 75 basis points to 3.500%.  This signals to markets that the Federal Reserve is keen on engineering a soft landing for the economy.

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Interest Rates Have Dropped!! Who else wants to lower their monthly mortgage payment?

By Todd Abelson NMLS #180858 on .

 331lend

Interest Rates Have Dropped!! Call 331-LEND (5363) to lower your monthly payment!

The news of 30 year fixed interest rates falling below 6% seems to have been lost in a sea of bad news about the economy and the looming recession everyone is talking about.

For most people we can lower your rate 1% or more. That could mean a savings of $100.00 or more per month at NO cost.doh So if you are planning on stying in your home you owe it to yourself to give us a call so we can reduce your monthly mortgage payment. Or simply apply online.

Well the economy has been in a recession for over a year now.  As Homer Simpson would say D’oh! 

Tucson saw a reduction on the number of homes sold in 2007 over 2006 by 37% fewer transactions.  As a result the home inventory levels have risen to 8,708 as of December 2007 which has doubled over the last 2 years. In a healthy Tucson market there are about 3,500 to 4,000 homes on the market.

For detailed residential sales statistics click her: Stats

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Another Happy Home Owner!!

By Todd Abelson NMLS #180858 on .

Stephan VanCleve and Melinda Davison
Portland, Oregon
Davison Van Cleve PC, Attorneys At Law
Tucson, Arizona Second Home Buyers

“Todd did a great job and we would highly recommend him!”

Click the play button below to listen in to one of many happy homeowners that used Todd Abelson for their home loan needs.

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Why Healthy Bodies and Healthy Marriages May Be More Relevant To Slowing Foreclosures Than Interest Rate Adjustments

By Todd Abelson NMLS #180858 on .

reasons for foreclosure

As the largest sub-prime loan servicer in the country, Countrywide handles payments for 11.90% of the sub-prime market.  That’s a massive $120 billion worth of loans.

The sheer size of that portfolio is why I am publishing the above chart.  Normally, data from one lender wouldn’t be enough for a clean sample, but Countrywide is the largest servicer of loans and it holds that title by a longshot.

According to Countrywide’s servicing department, just 1.4 percent of its loans that defaulted in July 2007 defaulted because of “payment adjustment”.

That’s a tiny number.

The publicly available presentation also noted the other reasons why its homeowners defaulted on their mortgages:

  • A decrease in household income led to 58.3 percent of all foreclosures
  • Medical bills and/or illness led to 13.2 percent of all foreclosures
  • Divorce led to 8.4 percent of all foreclosures
  • Inability to sell a home led to 6.1 percent of all foreclosures
  • Death caused 3.6 percent of all foreclosures

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