Archives for February 2008

I can’t wait!

For spring and our cherry blossoms…open! open! open!


We have three cherry trees in our front yard.  I’ll have to post an "after" photo once they finally blossom.  Meanwhile, I’ll try to be patient.

Do I Actually Have Clients?


I just received this question from a Mortgage Porter reader:

"I’m looking for licensed, local quotes to refinance my house. My ARM is ending and I’ve been entertaining quotes from contractors to redo my kitchen this Spring. Do you actually have clients or just an advice website?"

I’m really glad she asked this question.  Mortgage Porter is web-blog where I dish out my 2 cents on the mortgage industry and what ever advice I may have.   You may notice that I do not have any advertisements on this blog as many other blogs do.  It’s tempting…but I’ve steered clear of google ads and offers from various vendors.

My sole source of income is the origination of mortgages for those I assist with their financial plans.  My clients are the fine folks who with residential property anywhere in Washington State.  If your property is outside of Washington, I cannot provide your mortgage (I’m only licensed for Washington) however, I will try to find a Mortgage Professional who can assist you.

A majority of my clients are either returning clients whom I’ve helped before, referred to me from past clients or professionals (real estate agents, CPAs, CFPs, etc.) and I also have clients who read Mortgage Porter and decide they would like me to help them with their mortgage needs too!   I do not "cold call" or buy leads.

I am a Licensed Loan Originator (510-LO-32047) with DFI and hold a CMPS (Certified Mortgage Planning Specialist) designation.

Sorry, too late for a quick answer:  Yes, I do have a mortgage practice and I welcome new clients.  You don’t even need to refi or to be buying a home to be my client.  I am "adopting clients" who have been abandoned by their loan originator as well. 

Thanks for asking!

Second Mortgages and “Low Down” Mortgages

SunTrust Bank, one of the lenders we work with, is joining the ranks of other lenders who are eliminating or shelving their second mortgage products, including their combos where they have the first and second mortgage (such as an 80/10/10).  Where we once had several options for second mortgages and HELOCs, we are down to just a few.

Another bank that is still offering second mortgages (fixed and HELOCs) are limiting the total loan to value to 80% if your mid-credit score is 680-699.  A 700 credit score will allow you to go up to 85% total loan to value.

We do have another option for second mortgages that will go to a higher loan to value with lower credit scores…you pay the price with rates up to 3 points higher than what the other bank offers (with the lower loan to value).

What are your alternatives if you do not have 20 or 15% down? 

  • Seller financing for a second mortgage (private deed of trust subject to approval with underwriting).
  • Private mortgage insurance.  Upfront, monthly or lender paid.
  • FHA insured mortgages (subject to loan limits which will be changing soon)
  • VA insured mortgages

If you are currently preapproved to purchase a home and you are using an 80/10/10 or 80/15/5, I urge you to contact your Mortgage Professional to confirm your preapproval is still valid and to develop a "Plan B" for your home purchase strategy.   Some private mortgage insurance companies are also pulling back on higher loan to value mortgages (this includes lpmi and Fannie Flex); if you’re using less than 10% down with a pmi scenario–check with your Mortgage Professional for "Plan B" as well.

Qualify a Loan Originator with this One Simple Question

How do you track mortgage rates?

If the person who will potentially helping you obtain a mortgage answers:

“I get rate sheets in the morning and later if they change during the day.”

Run!  Anyone who is gauging interest rates by when lenders issue new rate sheets is behind the marketThe rates have all ready adjusted.

“I watch CNBC (or something along those lines) and keep tabs on how the 10 Year Note is performing.”

Wrong again.  Mortgage interest rates are not based on the 10 year note.  However you will hear the media and other professionals incorrectly state this is what rates are based on.  If you or your loan originator are tracking the 10 year based on when to lock, it will cost you.

The correct answer:

“I keep a close eye on mortgage backed securities.  I am committed to my mortgage practice and this is why I subscribe to a service (such as Mortgage Market Guide) which allows me to do so.”

Now here’s my question for you:

If you are working with a Loan Originator who is not dedicated to their practice enough to subscribe to a service that allows them to track mortgage backed securities or (even worse) who does not know or care to track what influences mortgage rates: WHY?

Bait and Switch Mortgage Rate Advertisements

EDITORS NOTE: Please notice this post is from February 2008! Wachovia is gone, 5.5% isn’t a great rate “right now” and I no longer publish rates at Rain City Guide or weekly here at Mortgage Porter. It simply takes too much time. I’m happy to provide your personal rate quote for your home located in Washington.  10/16/11.


Bait and switch is when a consumer is offered something tempting (bait) that is no longer available and then they are offered something else (switch).   I see this over and over again when lenders of all types promote rates in main steam media such as the radio, print ads, bill boards, television…you get the picture.

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Skip Two Mortgage Payments when You Refi!


The promise of not having to write a check for your mortgage payment for two months seems so tempting that many home owners chomp on the bit when a Loan Originator dangles that bait to lure in a refi candidate.  The truth is you’re not skipping anything.

Typically when your close on a mortgage, your first mortgage payment is the following month after 30 days have passed.   So for example, if your mortgage was closing on February 22, your first mortgage payment is due on April 1.  Although it seems like you’re “skipping” a month, what’s happening here is that the mortgage interest on the new loan is prorated from the day you close.  Based on this scenario, your interest is starting on February 22 and is prorated until the 28 (or 29 in a leap year such as we have this year).  The 6 extra days of interest is charged to you at closing under the prorated interest on your HUD-1 Settlement Statement.  Mortgage payments have 30 days of interest in arrears because of this and this is why your payoff is always higher than your monthly statements by about one mortgage payment (30 days of interest).

In order to do the “Skip Two Mortgage Payments” tango, your refinance needs to close as close to the 15th of the calendar month as possible and you, dear home owner, do not make your mortgage for that month.   So using our same example, if you closed your mortgage on February 15 and do not make a mortgage payment for February, your new mortgage payment is still not due until April 1.  You will have 15 days of prorated interest due at closing (half of a mortgage payment).   Did you skip anything?  No.  You only saved writing a check.  The interest is still there and nothing is free. 

When home owners try “skipping” payments, they also risk late fees being assessed by the bank who is being paid off.  If they do not receive the payment by the 15th, the borrower will have a late fee.  Even if the escrow company wires the payoffs to the underlying lender, there’s no guarantee they will receive it in time. 

Click here for a refi rate quote for your home located in Washington.

I was helping a couple with a potential refinance and they were very interested in skipping two month’s payments.  This would have been especially costly for them as we were paying off a FHA mortgage.   FHA mortgages do not prorate the interest when they are being paid off.  It only makes sense whenever possible to close them at the end of a calendar month so that the home owner isn’t paying double interest.   If they would have closed on February 15, they would have felt like they were “skipping” however their mortgage payoff would have had interest through the end of February AND they would have paid 15 days of prorated interest on their new mortgage. 

Loan Originators who use “skip two months payments” are hoping to skip all the way to the bank.  In fact the LO who was trying to lure the couple I helped last month was charging them 3 points for the same rate that I was offering priced with 1 point.  This lender is not from Washington State and has to rely on deceptive mailers in order to get new business…I’m sure it’s because no one who has obtained from them would return or refer their friends and family to them.

There’s nothing wrong with scheduling your closing so you have the illusion of skipping two payments, just know going in what it takes to make this happen and what your risks are (late fees).

Click here for a refi rate quote for your home located in Washington.

Review Your ARM Before You Refi

There is a lot of media and mortgage hype about getting out of your dangerous adjustable rate mortgages.  Mortgage companies stand to benefit every time you refinance and the media thrives on drama.  I’m contacted often by consumers who are horrified of their adjustable rate mortgage–depending on your terms (margin and index) your ARM may be fine!

One of my clients, Scott, who I helped with a refinance almost five years ago just contacted me curious about refinancing out of his current ARM into a fixed rate.  He heard on the news that mortgage rates are low right now.   

Scott obtained a 5/1 ARM with a start rate of 3.75%.  His fixed period is over around July of this year and his caps are 5/2/5 with a 2.25 margin and the index is the 12 Month LIBOR.   His current balance is about $121,500.   

Scott expressed an interest in doing another 5/1 ARM.  He’s not sure how long he will retain this property.   Currently, I can offer the following (both refi’s have closing costs of $1900):

  • 5.25% at 1 point (APR 6.965%) with principal and interest of $717.  Should Scott decide to pay the point, it will take 3 years to break even on the cost.
  • 5.625% at 0 points (APR 7.018%) with principal and interest of $748.

He can also elect to not refinance his ARM and wait to see what the payment will adjust to in July.  He still has a few months to wait this this out, however, if his ARM were adjusting today, here is what his payment would look like:

1 Year LIBOR = 2.85% plus the margin of 2.25% = 5.10%.  Rounded to the nearest rate, the new rate for the next 12 months would be 5.125%.   Taking his current balance of $121,500 at 5.125% for 25 years (the remaining term) would create a principal payment of $719.15.  This is without refinancing or additional cost (out of pocket or equity) to Scott. 

If Scott is comfortable allowing his ARM to adjust and making his payment of $719.15 for the next 12 months, he should not refinance.   Some home owners are "up in arms" over their adjustable rate mortgages and if it’s something that’s going to cause to lose sleep, you may want to check out what your options are for refinancing out of the ARM.  Regardless of what you do, it’s crucial that you understand your mortgage, the terms and how it operates and what your options are.   

If you need help, ask your Mortgage Professional to review your Note with you.  If you need a new Mortgage Professional because they’ve either left the business or have forgotten about you, I’m happy to adopt your Washington State mortgage.

The Trigger Finger on Mortgage Interest Rates

TriggerfingerVolatile times with our economy are giving lenders an itchy trigger finger when it comes to issuing rate sheets.  Just today, one of the lenders we work with issued 4 different rate sheets with various price change.

Lenders are just simply jumping at the bit…if you look at them cross-eyed they will issue a new rate sheet. It makes for very interesting times for Loan Originators when you’re trying to lock in a rate that you have just told a borrower is available.   During a rate change, many bank systems will hold or freeze during the change and you have to wait until the change is complete before you can see how it will impact you.  Those few minutes are enough to drive you crazy and you’ll will either be a hero to your client or not after the rate change takes place.

These days, several rate changes are the norm and not the exception.   Consider this, based on the last 30 days with a conservative lender who only offered two rate changes today (vs. the four another lender did today):

  • Days of daily rate sheet without changes in last 30 days: 7
  • Days with two intra-day price changes for a specific day within the last 30 days: 10
  • Days of three intra-day price changes for a specific day within the last 30 days: 5

A lender with a trigger finger can work in your favor when rates are improving.  Even better, a Mortgage Professional who works with several resources, such as a mortgage broker or correspondent lender, may be in your very best interest.

More drama is on the slate for tomorrow for mortgage interest rates with the CPI being released…stay tuned!