Archives for August 2012

Get a sneak preview of the art at Bumbershoot FREE!

This year, if you want to enjoy the art at Bumbershoot, you’ll need to buy a ticket…UNLESS you go on Friday, August 31, 2012 from 1:00 –  9:00 pm. for the free public preview.  The free preview takes place following Mayor McGinn’s Arts Awards ceremony which begins at noon at the north fountain lawn at the Seattle Center.  For more information, click here.

My black velvet painting of Elvis Presley enjoying a peanut butter bacon banana sandwich will be part of the Elvistravaganza exhibit celebrating the 50th anniversary of Elvis’s visit to the Seattle Center.

I am allowing my painting to be auctioned at the event with proceeds going to Cafe Race Love

Hope to see you there!

Answering a question regarding HARP 2.0 and PMI

Dear Rhonda:

I currently pay PMI on my mortgage, if I refinance under HARP 2.0, after refinance, will the PMI still exists? Would the PMI premium be lower since the amount refinanced is lesser than the previous mortgage?

Dear Reader:

Yes, if you currently pay PMI on your HARP 2.0 eligible mortgage, you will also have private mortgage insurance in your new mortgage payment with your new refinanced mortgage.  It will be based on the same coverage (percentage) amount as your existing pmi. So if your mortgage balance is lower, the monthly pmi payment may be slightly lower as well.

I recommend comparing your existing payment (PIMI) to the proposed new payment, factoring in when your existing PMI may drop off.  If you’re within months from your existing pmi dropping off, it could be worth delaying refinancing, however, if t’s after December 2013 (when HARP 2.0 is currently scheduled to terminate) it’s probably in your favor to refinance now.

If your home is in Washington state, where I am licensed to originate, I’m happy to help you.

What may impact mortgage rates the week of August 27, 2012

I am on a family vacation and will be returning to business as usual following Labor Day.  While I’m enjoying a few days off, here are some of the scheduled economic indicators that may impact mortgage rates this week.

Tuesday, August 28: Auto Sales and Consumer Confidence

Wednesday, August 29: GDP Chain Deflator, Gross Domestic Product (GDP), Pending Home Sales and Beige Book

Thursday, August 30: Personal Consumption Expenditures (PCE) and Initial Jobless Claims

Friday, August 31: Chicago PMI and Consumer Sentiment (UoM)

Of course unscheduled events may impact mortgage rates as well. Remember that typically if the stock market is rallying, mortgage rates tend to suffer as investors will trade the safety of bonds (like mortgage backed securities) for the potential higher return of stocks.

Mortgage Master Service Corporation will be closed on Monday, September 3, 2012 to celebrate Labor Day. 

Changing jobs during the mortgage process

Sometimes an employment opportunity may become available while you’re in the process of buying a home or refinancing. Lenders are looking at a borrowers employment and income stability so depending on the type of field you’re in, a change of employment may or may not impact your loan approval. 

As long as you’re staying in the same line of work and if you have an annual salary, it probably won’t be an issue. The lender will probably require at least one pay stub (possibly more to document your income) from your new employer as well as a verification of income. If you have an employment letter or contract from the new employer, this can be helpful to provide the lender as well. With new employment, signing bonuses are not factored into the annual income however, they may be used towards the down payment or closing cost as your seasoned funds. 

If the new employment is not related to the same line of work, this may cause an issue with the loan approval as lenders are looking for two years of employment in the same or related field. If the income structure has changed, this may cause an issue as well unless it is to an annual salary. The underwriter may require a written letter explaining your employment history.

Moving from annual salaried income to a potentially flexible type of income may derail your loan approval. Self-employed, hourly income, bonus or commissioned income requires a two year history before a lender can use it for qualifying purposes.

Sometimes a promotion can impact loan approval if pay structure changes. For example, if a borrower was paid an annual salary and then receives a promotion which reduces the annual salary in exchange for a higher bonus or commission structure, the bonus or commission income cannot be used unless the borrower has been receiving that type of income for a minimum of two years. In this case, the new lower base salary (the “guaranteed” portion of the income) can be used, but not the “flexible” bonus type income. 

If you are considering a job change during the mortgage process, it’s crucial to inform your mortgage originator as soon as possible. Your loan application needs to be updated and the lender will be doing a verification of employment prior to funding your mortgage.  

If you’re considering buying or refinancing a home anywhere in Washington, I’m happy to help you!

HARP 2.0 Refi Volumes Dramatically Up while Major HARP Lender Holds Off on New Applications

In a report issued earlier this month by the Federal Housing Finance Agency, it was revealed that many home owners are taking advantage of the HARP 2.0 refinance program.  From the FHFA’s Refinance Report:

“In June, borrowers with loan to values greater than 105% accounted for 62% of HARP volume, up 32% in May ad 15% in 2011. In addition, 18 percent of underwater borrowers chose shorter-term 15 and 20 year mortgages, which build equity faster than traditional 30 year mortgages.”

It hasn’t always been a slam dunk for home owners to find lenders willing to do higher loan to value HARP 2.0. Some banks have been limiting who they will help with HARP refi’s and/or have additional underwriting overlays in addition to the Fannie Mae or Freddie Mac guidelines. This causes the entire process to bog down when only a few resources are available to the hoards of borrowers who need help.

Last month, I shared with you that one of our resources, EverBank, elected to stop offering HARP 2.0 refinances to mortgages securitized by Freddie Mac. Yesterday we learned that another major lender in the HARP 2.0 arena, CMG Mortgage, has elected to to stop accepting applications effective yesterday in an attempt to get a handle on the volumes of applications they already have in their pipeline.  From CMG’s memo yesterday:

“Like you, we knew this program would help millions of Americans that have struggled to stay in their home despite their property being substantially underwater…. What we didn’t know was that so few lenders would have stopped either partially or completely offering HARP 2.0. As a result, we have become inundated with business. …our turn times do not make us happy, you happy or your borrowers happy…we feel the need to temporarily stop taking HARP 2.0 loans to allow us to catch up…. Once turn times are back in line, we will resume taking submissions of HARP 2.0 loans as we have i the past.”

We are still accepting applications for HARP 2.0 mortgages for homes located in Washington state. We are brokering most loans that are over 105% loan to value which means they do take much longer to close. Most loan to values under 105% we are able to care for through our correspondent channels.

If you’re interested in refinancing your Washington home, I’m happy to help you. 

USDA fees increasing for 2013 effective October 1, 2012

Beginning October 1, 2012, USDA will be increasing their guarantee fee and annual fee.  USDA’s guarantee fee is much like a VA funding fee or FHA upfront mortgage insurance premium: it is a lump sum that is most often financed into the loan. The annual fee, like FHA, is paid monthly as part of the mortgage payment.

The guarantee fee for purchases will remain at 2% of the loan amount. For refinances, the guarantee fee will increase from 1.5% to 2%.

The annual fee for both refinances and purchases will increase from 0.3% of the base loan amount to 0.4% effective October 1, 2012.

USDA mortgages offer zero down financing for borrowers who meet income limits and properties in designated rural areas.

NOTE: The photo in this post reflects eligible rural areas for 100% financing using a USDA zero down mortgage. If the property is not located in an orange (or peach?) shaded area, it may be eligible to purchase with a zero down mortgage.

USDA Refinance Funds No Longer Available for 2012

We received this notice late last week from USDA:

FY 2012 refinance funds are exhausted.

At this time, we are unable to process any GRH Refinance transactions. The applications currently awaiting review by Rural Development will be returned to the lender without action.
Refinance funding will be restored in October. The new fee structure will be 2% upfront and 0.4% annually. Because of the new fee structure, any refinance applications currently with RD will have to be re-underwritten, and resubmitted for review. Lenders may submit applications for refinance (at the new rate) at any time, however, RD will not review them until funding is restored.

Please note that funding for new applications is still available and will likely remain so through the fiscal year.

USDA offers zero down financing for residential purchases in designated rural areas to families under certain income levels.  


Mortgage rate update for the week of August 20, 2012

Mortgage rates have been trending higher over the past few weeks (they are still very low).  Here are some of the scheduled economic indicators that may impact mortgage rates this week:

  • Wednesday, August 22: Existing Home Sales and FOMC Minutes
  • Thursday, August 23: Initial Jobless Claims and New Home Sales
  • Friday, August 24: Durable Good Orders

As I write this post (9:00 am PST) the DOW is at a 4.5 year high (13,260). Remember that as the stock markets improve, you will see investors trade the safety of bonds (like mortgage backed securities) for the possibility of higher returns of stocks. This will cause mortgage rates to trend higher as will signs of inflation or that the economy is improving.

Clients often ask me if the government controls mortgage rates and are surprised to learn they do not. The government has been involved with buying mortgage backed securities which is manipulating mortgage rates to lower levels however, they do not directly set mortgage rates. The Fed does set the Fed Funds Rate, which impacts the rates for HELOCs but not mortgage rates. 

Mortgage rates often change throughout the day. Last week, there were days where one of the lenders I work with issued three to five changes in just one day.