Looking Back And Looking Ahead : February 19, 2008

By Todd Abelson NMLS #180858 on .

Short-term rates are staying flat as long-term rates are rising

Early last week, mortgage rates rose on strong consumer spending and Warren Buffett’s offer to assume $800 billion in debt from three major bond insurers.   

Both reports were interpreted as signs of long-term strength in the economy, leading mortgage rates higher for long-term products such as the 20- and 30-year fixed rate mortgage.

Meanwhile, Fed Chairman Ben Bernanke painted a different picture about the economy’s health. 

In his testimony to Congress, Bernanke called attention to credit market weakness and alluding to a need for future Fed Funds Rate cuts.

The chairman’s testimony, coupled with the worst consumer sentiment reading in 16 years, helped to hold short-term mortgage rates flat, even as long-term rates were rising. 

In this holiday-shortened week, there is very little data and only one Fed speaker to influence the markets.  Therefore, expect external pressures to weigh on market sentiments this week.

The lingering questions about the economy’s health remain and so long as that uncertainty exists, mortgage rates will stay unsettled. 

We’ve seen extreme bouts with volatility since December and there’s little reason to suspect it will stop now.

(Image courtesy: Bankrate.com)

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The Last Lecture on SonyRadio.com

By Todd Abelson NMLS #180858 on .

Click on the link below to watch a video about a message that Dr Oz and Oprah Winfrey have to give:


“46 year old Carnegie-Mellon Professor Randy Pausch is a dreamer.

His positive outlook on life is remarkable, given his circumstances. After watching his story, in this The Last Lecture, your life may never be the same again. Please watch the entire video. After you do, you’ll understand why.

May God bless this dear man and his family.”



What The New Conforming Loan Limits May Mean To You

By Todd Abelson NMLS #180858 on .

Currently, homeowners whose loans exceed $417,000 pay a premium because their loans are not securitized the way that conforming loans are.

The $168 billion economic stimulus plan signed Wednesday includes a temporary increase to conforming loan limits in some parts of the country.

Currently, many homeowners whose loans exceed $417,000 are paying higher interest rates because their loans are not securitized the way that smaller loans are.

The loan limit increase is intended to make housing more affordable in certain “high cost” areas around the United States. 

However, the loan limit changes are not immediate.  The stimulus package grants HUD 30 days to determine which metropolitan areas should be designated as “high cost” and it should take another few weeks for Fannie Mae and Freddie Mac to remodel their mortgage pricing engines.

All told, it could be mid-April before the new limits are in place.

Author’s Note: There is a lot of speculation about which areas will be designated as “high cost” and nobody knows for certain until HUD decides.  Rather than misreport the facts, we’ll save our coverage until something is concrete.   However — if you’re in a “high cost” area, you probably already know it.

When the new limits are official, though, expect that many homeowners will take advantage.  That will lead to underwriting delays because mortgage refinance activity will surge.

Therefore, consider being proactive about your financing options if:

  1. You suspect you live in a high-cost area
  2. You have liens on your home exceeding $417,000

If you don’t live in a high cost area, you can’t take advantage of the new loan limits; and if your outstanding liens total less than $417,000, you won’t want to be helped.

Converting from a jumbo home loan will not be appropriate for everyone, but it will be right for some.  Get personal advice and figure out what’s best for you.

And then hope the HUD fingers your neighborhood as high cost.

Good News For First Magnus Financial Corp. Employees

By Todd Abelson NMLS #180858 on .

Good news for First Mangus Financial Corp. Employees!

There was an article today in the AZSTARNET newspaper about the the bankruptcy approval. Looks as though Judge James Marlar will have a decision as soon as this week.

According to the AZSTARNET “First Mangus representatives have said that the employees would be completely repaid, up to $10,000 per person, under the plan.”


Looking Back And Looking Ahead : February 11, 2008

By Todd Abelson NMLS #180858 on .

This week, expect more of the same volatility with January's Retail Sales data and five Fed speakers including Fed Chairman Ben Bernanke

Mortgage markets are conflicted about the U.S. economy and the confusion is impacting home buyers.

If you’ve recently tried to lock a mortgage rate, you’ve probably experienced it personally

On one hand, reports of plunging sales suggest that the economy is slowing more quickly than expected. 

This is recessionary and tends to be good for mortgage rates.  So, some days, rates have been down.

On the other hand, some pundits (including a Federal Reserve official) are saying that recent Fed cuts may stoke inflation in the second half of 2008. 

This is inflationary and tends to be bad for mortgage rates.  So, some days, rates have been up.

Neither side is wrong — 2008 will likely show signs of both recession and inflation at some point.  Markets are waking up to this fact.

And this is why mortgage rates have changed so much from day-to-day — investors can’t agree upon exactly when the Fed rate cuts will work their way through the economy.  With each “target date” change, mortgage rates change.

This week, expect more of the same volatility with January’s Retail Sales data being released and five Fed speakers (including Fed Chairman Ben Bernanke) stumping. 

The spoken word of the Fed Chief can be a very powerful influence on markets.

If you’ve recently gone under contract for a home, you may find peace of mind by concentrating on a mortgage payment as opposed to a mortgage rate; rates could change multiple times each day and timing a market-bottom can be futile.

(Image courtesy: CNN)


By Todd Abelson NMLS #180858 on .

Through an official announcement just received, MGIC and other MI companies have just reclassified all of Arizona, mipCalifornia, Florida, Nevada as well as many counties in several states as “restricted markets”.

As such, here are their new guidelines for issuing Mortgage Insurance beginning March 3rd.

Mortgage Insurance will still be available on the following loans:

• 95% Loan-to-Value with a credit score of 680 (90% LTV with 620) based upon full documentation for Primary & Second Homes only.

Mortgage Insurance will NO LONGER BE AVAILABLE on the following loans:

• Any loan greater than 95% Loan-to-Value (good-bye 100% financing)
• Reduced Documentation or A-Minus (“Expanded Approval”) loans
• Investment properties of any kind
• Cash-out refinances of any kind
• Any loan with the potential of negative amortization.

New rules will also apply to any loan with LPMI (lender paid mortgage insurance) or One-time (up front) mortgage insurance policies.
These changes go into effect on March 3rd so if you’re considering something like this…


Note that FHA and VA loan programs are not affected.

What’s Your After-Tax Mortgage Rate?

By Todd Abelson NMLS #180858 on .

Mortgage interest may be tax-deductible

Many homeowners are entitled to two major tax deductions — one for annual interest paid on a home loan, and another for real estate tax bills paid to government.

Calculating your approximate tax credit is basic:

  1. Add mortgage interest paid and real estate taxes paid together
  2. Find your marginal tax rate
  3. Multiple your tax bracket by the sum of Step 1

So, for a homeowner that paid a combined $13,000 in mortgage interest and real estate taxes last year, and who is in the 28% marginal tax bracket, a tax credit of $3,640 may be due from the IRS.

This credit is one reason why some people sometimes refer to “after-tax mortgage rates”.  An after-tax mortgage rate is the adjusted interest rate after the IRS doles out credits and is calculated as follows:

(After-Tax Mortgage Rate) = (Mortgage Rate) * (1 – Marginal Tax Rate)

The same homeowner with a 6.000% mortgage rate, therefore, has an after-tax mortgage rate of 4.32%.

Because not every homeowner is eligible for mortgage interest and/or real estate tax deductions, and because not every homeowner should claim them, you should consult with your accountant to see how tax credits fit into your tax liability schedules. 

Federal income taxes are highly personal and require the attention of an experienced professional.

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Learn About How The Income-Equity-Credit Triangle Helps Define Mortgage Planning

By Todd Abelson NMLS #180858 on .

All mortgage approvals are strictly based on what I call the Income-Equity-Credit Triangle. 

The stronger the elements of the triangle, the more likely a person will qualify for a conforming (or “prime”) mortgage.

The triangle’s three corners are defined as follows:  1

• Income: The relative strength of income versus debts.  Also referred to as debt ratio.
• Equity: The percentage of equity in a home.  Also referred to as loan-to-value, or LTV.
• Credit: The middle of a person’s three credit scores, as reported by the three major credit bureaus.

When all three elements of the Income-Equity-Credit triangle conform to the guidelines, the “Mortgage Approved” target is fully visible.  This means that the home loan application is very likely to be approved.

When any one element is weak, on the other hand, the triangle’s area shrinks and a home loan approval becomes much less likely or likely with different terms.

Weakness in one of the three areas usually requires exceptional strength in the two other categories to outweigh the drag on the mortgage approval.  (more…)

Help Your Home Emotionally Connect To Buyers

By Todd Abelson NMLS #180858 on .

The end of the Super Bowl kicks off the Real Estate Spring Buying Season. 

As home sellers should prepare for the season’s upcoming homebuyers, they could do worse than to watch this four-minute home staging video from Barbara Corcoran. 

Barbara offer simple steps that “won’t cost you a lot of money but could make a 10-20 percent difference in the selling price of your home”.

Then, to watch home staging in action, tune in to well-known Home Staging professional Barb Schwarz as she takes the 20/20 news crew into Bothell, WA for a before-and-after.

With so much housing supply relative to recent years, home staging could be the difference-maker to home sellers.  And it’s usually less expensive than a price reduction.