Orlando Mortgage Blog

Rates dipped the last couple days to historic fixed rate lows in the high 4's and though they knee jerked back up in the last 24 hours by about .25% to around 5% on a 30 fixed, that's still great and we can have hope of lower horizons finally depending on our Uncle (Sammy).

It wasn't the Fed FOMC rate cut to 0" to .025% on the overnight rate. It was the promise of the Fed's comment that they would be buying up as much as $660 Billion (with a "B") in mortgage backed securities from Fannie and Freddie and the subsequent loosening of lenders willingness (maybe, we can only hope) to make mortgage loans again because they may have someplace to sell them. That was good for the long rates so far though it does nothing to address the much tightened lending standards, Mortgage Insurance issues and the backlog of homes on the market in the short run.

Yes it has kicked up some refinancing dust in the last few days and as usually happens folks don't move on it fast enough thinking "It will go lower." What happened...it went up 0.25% in rate since yesterday. Be careful, but not greedy. The current rate after the bump today is 2.25% below the rate I got on my first home in 1974 which was 7.25% (I know). Forest for the trees folks...

Bill Wilbanks, Owner

Orlando Mortgage Masters

Anyone considering a first mortgage refinance recently that was shopping for a rate buy-up (where you take a higher rate and some or all the closing costs are paid by the lender) has probably run into this. Investors who have become very afraid of getting paid off early on their mortgage back securities and not attaining the expected yield on that investment are driving the coupon a lender pays much higher as the rates increase above Par.

What does this mean? Let me step back a moment. Par is the rate level, if you could get it, where no one gets paid by the lender at that rate level to do the loan and no points are charged by the lender on the yield. A rate below Par "costs" discount points to obtain, they make up the yield loss up front. The lower the rate, the higher the points charged. When you take a rate "above" Par, points are paid by the lender into the transaction and may be used to cover the origination fee and other closing costs up to a maximum percent loan-to-value depending the transaction rules. The higher the rate taken by the borrower, the more that gets paid and so on.

The problem in recent months is that investors are afraid that they won't make the investment yield they require on mortgage backed securities if they believe rates may decline. A refinance boom may have borrowers paying off their old loan early and the investor loses return on the investment. Therefore the hedge or "coupon" cost has gone up on the higher rate levels that would allow the rate buy-up and subsequent closing cost payment to take place. So, where in recent times you might expect a 30 year fixed rate that was around .50%+/- higher than a normal quote in order to pay your closing costs with the extra yield premium paid. Even a full 1% increase in rate today will not fully cover them and your loan person still must get paid to do the loan. Lenders simply aren't making buy-ups attractive presently.

There is good news for the typical borrower that wants to do a standard refinance where they roll-in of the costs and fees into the new loan. Fixed rates are at levels not seen since the 1950's. Recovery time of your closing costs on a new refinance will depend on how far your rate goes down below your current rate and therefore the payment drop you receive. Your monthly payment savings divided into the new closing costs will tell you the time it takes to recover your new costs ($100 monthly savings divided into $3,000 costs would recover in 30 months). In the mean time, your payment is lower from the first new payment onward. In the example above you would need to stay in the new mortgage 2.5 years to recover your costs.

Bill Wilbanks

Orlando Mortgage Masters

We monitor rates every work day, opening to closing. Right now it looks like it may be time to consider refinancing once again folks. It's simple. Just click the free Rate Watch Service button on our home page at www.OrlandoMortgageMasters.com. Tell us what your needs are in a conventional rate and your loan requirements. We'll email you if we see it or call you if you prefer. No obligation. We're hoping to earn your business.

Let us do the work and don't miss another opportunity to grab a great rate!

Bill Wilbanks

Orlando Mortgage Masters

Call (407)647-4440, ext. 1 

Don't set your hopes too high; at least don't expect a fast answer. That's my best recommendation to anyone considering making an offer on a short sale transaction today. I'll explain in a moment, but first what is a short sale? It's making an offer on a house that is lower than the debt currently owed on it prior to a lis pendens action (foreclosure) and asking the lender(s) to accept less than what they have due.

The lender can generally be expected to take up to 120 days to make a decision on your offer. In the mean time anyone can make an offer on the property of course. All sellers/mortgage holders will want a prequalification or preapproval letter on you to be submitted with your written offer. It's been my experience this last year in working these transactions that about one out of three or four get accepted and many go the full four months or so only to be outbid at the last moment leaving someone disappointed. Some lenders require an earnest money deposit to guarantee a "decision by a certain date" on your offer that is refundable if it's not accepted and applied against the purchase price if it is.

It has seemed in a lot of these cases that investors seem to win many of the offer wars late in the bidding game when strengths and qualification weaknesses such as downpayment ability may have surfaced to parties involved, but that may just be part of the give and take in a bidding war. I can't say their potential to buy multiple properties influenced it in any way, but as always make your best offer and be prepared to provide whatever is needed to get approved. I can tell you that Realtors® and loan officers work very hard and out of their own pocket to make these deals work for buyers with a relatively low closure rate overall. And they don't get paid if it doesn't close.

So if you are considering a short sale offer expect an extended wait on your offer response. Expect to be met with competitive offers almost for certain all the way to the end. And then if there are currently multiple mortgages on the house now (1st and 2nd let's say) both mortgage holders will have to agree to accept the short sale offer. Many times the first mortgage holder will accept an offer, but not the second mortgage holder and the deal falls apart or a better offer must be made.

If you are trying to speed the process and improve your success rate you might want to ask your Realtor® to show you traditional listings or bank owned properties where a decision and closing can be made much faster. If the bank owns it now, they in turn want to get it off their Real Estate Owned (REO) list as soon as they can. The faster you can get a fully accepted contract, the faster you can lock your interest rate and move on and in.

Bill Wilbanks

Orlando Mortgage Masters