I’m happy to adopt your ARM…no refi required!

One of the Realtors I work with sent a Seller to me since they were having second thoughts about the lender they were working with for the property they were buying in Arizona.  I reviewed their estimate and discovered their proposed loan had a prepayment penalty that they were not aware of.   Long story short, they decided not to buy (not just because of the lender…I believe their house did not sell in time and they were "bumped").    I’ve told their story in a previous post.

They recently contacted me wanting to know if they should refinance.   They have 5 years left on their 7 year ARM which is currently at 5.5%.     Since their mortgage is not set to adjust until the summer of 2012 and they still hope to move from their current residence, I recommended that they do not refinance at this time.   Even though I’m not her original loan originator, she asked me if I would mind watching her rate and keeping tabs on her ARM.    Managing mortgages is part of my standard business practice for my clients.   I added her information to my database and told her I will gladly add her to the mortgages that I care for…even though I did not originate her current mortgage.

It got me thinking… if you or someone you know have an adjustable rate (or actually mortgage) and you don’t have a Mortgage Professional who is helping you manage that debt (watching current mortgage interest rates and trends, keeping tabs on when your mortgage payment may adjust), and you’re in the beautiful Washington state, I’m glad to include include your existing mortgage to my database.   No refinance required.    If you’re satisfied with your Loan Originator, then ask them to manage your mortgage for you.   I’m sure they’ll be happy to do so (again, no refinance is required).

Now if I could only figure out a way to be paid for all the times I’ve talked people OUT of refinancing!   Seriously, if you have an adjustable rate mortgage, please contact a Mortgage Professional to review the terms. 

Foreclosures slightly up in King County

Foreclosure0919fix_2While we continue to fair better than the rest of the country, with many ARMs (adjustable rate mortgages) getting ready to re-set out of their introductory rates, this trend may continue.   

This is why it’s critical that all home owners with adjustable rate or balloon mortgages contact their Mortgage Professional as soon as two years before their mortgage rate is set to adjust.   This (ARMs adjusting) is not limited to those with subprime mortgages.   

The more time you allow yourself to get your credit in check and possibly avoid having home values depreciate, the better off you’ll be should you need to refinance.   Sadly, I’ve been contacted by a couple of home owners in other parts of the country who are not only facing higher payments from their adjusted ARM payments, mortgage balances that exceed their home values and plumeting credit scores.   FHA Secure won’t help them since they’re beyond the 97% loan to value.   It’s too late.

Please don’t put off contacting a Mortgage Professional.   Take action before you’re in trouble.   

Here’s a great article by Sandy Kaduce: Avoid Losing Your Home.

Concerned questions from a home owner regarding the “credit crisis”

mortgageporter-thinkingThe other day, one of my past clients asked me:

“I was wondering if there are issues that could arise if this credit crisis continues in a downward spiral? The market hasn’t been doing well in the past week with concerns about the “credit crisis”.

Is there any reason for concern that we could have our home loan called in early if our mortgage company gets into trouble? Are there other issues that we should be thinking about if this causes a ripple affect to other areas of the economy?”


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What’s going on in the mortgage industry? A must see graph spells it out.

This graph from the New York Times paints a picture that I can’t call pretty.   

"So what’s gone wrong in the last few months?  An unfortunate combination:  more loans in default (many borrowers were never in a position to pay them off), risky bets worth billions made by some investors (deals now gone sour), and the reversal of the housing boom."

A big hat tip to Behind The Mortgage.

Don’t let your ARM smack you (or your friends)


If you currently have an adjustable rate or balloon mortgage that is scheduled to adjust within the next 12 months, I strongly encourage you to contact a Mortgage Professional as soon as possible.    Especially if you are considering keeping your home beyond the adjustment date. 

Don’t wait.  Here’s why:

  • Odds are your payment will increase significantly (depending on your caps) and you won’t want the new mortgage payment.
  • Underwriting guidelines have tightened significantly.   If you have issues with your credit, it is best to start work on repairing or improving your scores now instead of waiting until it’s time to refi (that’s too late).
  • Lenders are pulling back on programs.   Especially non-conforming loans (loan amounts over $417,000 or credit, assets, income or employment not meeting traditional guidelines) and ARMs.   
  • Some lenders are shutting their doors as they are not able to fund loans they’ve committed to. 
  • Less available loans may translate to fewer buyers for properties.   This will impact sales comps for appraisals.   You cannot count on huge appreciation or values on your home to bail you out of your ARM.   We’ve been fortunate in Seattle so far; I cannot see how this won’t impact our local market home values.

This is truly an urgent situation that requires your immediate attention.   The more time you can give yourself and your Mortgage Professional to determine the best strategy for your next mortgage, the better off you’ll be.   And, if you know that your friends or family members have ARMs that are due to adjust anytime soon, please encourage them to contact a Mortgage Professional as well. 

Take control of your ARM or it just may leave you stinging.

Are You Preapproved for an Interest Only Mortgage?


You better double check with your Mortgage Professional.  As of Sunday, July 22, 2007 underwriting guidelines are tightening up for interest only conventional (loan amounts $417,000 and lower) mortgages.

  • Fixed Rate Mortgages (ex. 30 year fixed with 10 year interest only payments) will be based on the full PITI payment using the Note Rate.  (If there is a temporary buy down, the qualifying is still based on the Note Rate).
  • Interest Only ARMs:  Qualifying is based on the full principal and interest payment (PITI) at the fully indexed rate (index + margin).
  • Negative Am. (deferred interest) ARMs:  Qualifying will be based on the full PITI at the fully indexed rate amortized over the full repayment term using the loan amount based on the amortization cap.   (I am not a fan of Option ARMs and I have never provided one to any of my clients.  For some people, they have probably been very successful tools…most of my clients, once they understood how the mortgage works, would opt for an interest only ARM instead of this mortgage).

So what does this mean?

Previous Guidelines:  If a buyer was preapproved using a 5/1 Interest Only LIBOR ARM based on an interest rate of 6.125% (note: this is NOT a rate quote and is only for purpose of illustrating the guideline changes) earlier this week qualified for a payment in the amount of $2041 (plus taxes and insurance), they could borrow $400,000.

New Guidelines:  The current index for LIBOR is 5.4 plus the margin of 2.375% for this particle loan program = a fully indexed rate of 7.775% for the same ARM mentioned above.   Qualifying the borrower for a $2041 payment based on a 30 year amortization at 7.775% means the borrower now qualifies for a loan amount of $284,200.

This will obviously have a dramatic impact on purchases and refinancing out of interest only products.   This is still very new and we’ll see if non-conforming products follow suit.

Here’s what you need to do:

  1. Agents:  Contact your Mortgage Professional today to see if you have clients who are preapproved for conventional financing with any interest only payments.   Confirm your buyer is still qualified.  (Your LO may need to check Fannie Mae guidelines).
  2. Buyers/Borrowers:  If you’re using interest only products with loan amounts of $417,000 or less, contact your Mortgage Professional to verify you are still approved.
  3. Buyers:  Now more than ever, it’s crucial that you meet with a Mortgage Professional prior to buying a home to become preapproved.   With mortgage programs and underwriting “tightening”, there will be less options compared to just a few months ago.
  4. Buyers/Borrowers:  Having solid credit is also more important.   You should review your credit a couple times a year.  If your scores are below 680, work on improving your credit.
  5. Borrowers who currently have ARMs:  Do not wait until just before your ARM is about to adjust if you are considering retaining your home.   Contact your Mortgage Professional six months in advance to review your credit in case you need to make adjustments and/or repairs.

This is not the time to be hiding or not dealing with your mortgage…guidelines are changing quickly and you need to be proactive and responsible with your largest investment.   If you need help, find a qualified Mortgage Professional such as a Certified Mortgage Planning Specialist, who has been acquired additional training and education or get a referral from someone you trust and respect.

My Community is now more expensive

Earlier this month, Fannie Mae changed the pricing on their My Community program across the board to all lenders by 1% increase to fee.    If you’re using a My Community program and you’re transaction is not yet closed, you may want to check with your Loan Originator to make sure your lock is still valid.

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ARMS Defined

1560492_10151836164426046_1986095200_nAdjustable Rate Mortgages, also referred to as ARMs, come in many shapes and sizes.  This post will be focusing on fixed period ARMs, such as the 3/1, 5/1, 7/1, 10/1…etc. that feature a fixed rate period before adjusting.

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