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Rates still low on oil concerns, but bearish mortgage markets could develop quickly

March 7, 2011

Are you currently in the process of buying a home or refinancing in Chicago or vicinity? Trying to decide when to lock can be a stressful and difficult decision. In my job as a mortgage lender, I watch the markets daily to keep my clients abreast of changes to assist them in securing the best mortgage rate possible. Please see my recommendations below.

  • Short-term – LOCK
  • Long-term – FLOAT

It is important now to realize that although rates are down, markets can turn bearish very quickly.  Fence-sitters should decide soon on their course of action or risk higher rates .  Economic data that can affect mortgage interest rates.

Monday

  • January Consumer Credit

Tuesday

  • $32 Billion 3-year Treasury Auction

Wednesday

  • MBA Weekly Mortgage Applications
  • January Wholesale Inventories
  • $21 Billion 10-year Treasury Auction

Thursday

  • Weekly Jobless Claims
  • January Trade Deficit
  • $13 Billion 30-year Treasury Auction
  • February Treasury Budget

Friday

  • February Retail Sales
  • University of Michigan Sentiment
  • Business Inventories

Improved Employment Numbers Reverse Mortgage Rate Trend

March 4, 2011

I usually like being right. In my last update, I addressed the fickleness of markets and advised that the lower rates of late could be a fleeting affair. Based on the events of the last week, the turned out to be more prophecy than prognostication as we saw the week end with a reversal of the recent downward trend.

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Continued Middle Eastern unrest keeps opportunity alive for mortgage ratewatchers

February 28, 2011

Are you currently in the process of buying a home or refinancing in Chicago or vicinity? Trying to decide when to lock can be a stressful and difficult decision. In my job as a mortgage lender, I watch the markets daily to keep my clients abreast of changes to assist them in securing the best mortgage rate possible. Please see my recommendations below.

  • Short-term – Cautiously FLOAT
  • Long-term – LOCK

Economic data that can affect mortgage interest rates.

Tuesday

  • January Construction Spending
  • February ISM Manufacturing Index
  • February Car and Truck Sales

Wednesday

  • MBA Weekly Mortgage Applications
  • February ADP Non-Farm Private Jobs
  • February Beige Book

Thursday

  • Weekly Jobless Claims
  • Q4 Revised Productivity
  • Q4 Revised Labor Costs
  • February ISM Services Sector Index

Friday

  • February Employment Report
  • January Factory Orders

Mortgage Rates Dip in Wake of Increased Libyan Unrest

February 25, 2011

Finally, after weeks of pent up parody lyrics I am again able to unleash upon you, my loyal readers, a musical interlude and tribute the late, great Groucho Marx.

Libya (Sung to Lydia, The Tattooed Lady)

Ooooooooooooooooooh

Libya oh Libya, Oh have you seen Libya
Libya a country unraveling
She is 6th in Middle East oil reserves
The unrest in her people shakes world market nerves, so

Read all lyrics and entire article

Turmoil in Libya pushes oil up and mortgage rates down

February 22, 2011

Are you currently in the process of buying a home or refinancing in Chicago or vicinity? Trying to decide when to lock can be a stressful and difficult decision. In my job as a mortgage lender, I watch the markets daily to keep my clients abreast of changes to assist them in securing the best mortgage rate possible. Please see my recommendations below.

  • Short-term – Cautiously FLOAT
  • Long-term – LOCK

Please note that the turmoil in Libya has savaged equities markets.  Oil has increased in price and bonds have once again been elevated to safe haven status.  I am predicting the will be the single most influential driver this week for mortgages.  The week ahead for economic data that can also affect mortgage interest rates.

Tuesday

  • Case/Shiller Home Price Index
  • Consumer Confidence
  • $35 Billion 2-year Treasury Auction

Wednesday

  • MBA Weekly Mortgage Applications
  • Existing Home Sales
  • $35 Billion 5-year Treasury Auction

Thursday

  • Weekly Jobless Claims
  • Durable Goods Orders
  • FHFA Housing Price Index
  • New Home Sales
  • $29 Billion 7-year Treasury Auction

Friday

  • Quarterly GDP
  • University of Michigan Consumer Sentiment

Turmoil in Middle East and Unemployment Keep Mortgage Rates Low

February 18, 2011

This week, we finally saw a return to normalcy. For months, mortgage professionals have felt like we had stepped through the lending looking glass into some Carrollesque world driven by completely different laws of nature and physics. We have been scratching our heads, perplexed by the mortgage markets ability to repeatedly perform counter to conventional wisdom. Time after time, we saw negative or tepidly positive economic news result in rate increases. This finally came to an end this week as mortgage pricing responded as expected.

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Asset-based lending – A great alternative when traditional mortgages do not fit

February 17, 2011

iStockphoto,houses,economy,dollars,US currency,notes,paper folding,concepts,finances,real estates,loansIn this time of tightening guidelines, it is becoming more and more difficult to find the right mortgage loan.  Often times idiosyncracies associated with the borrower or property can actually eliminate traditional mortgage loans as an option.  As a result, programs such as asset-based lending have grown in prominence for many borrowers.

Asset-based lending, sometime called securities-based lending, allows a borrower to borrower money against a portfolio of securities.  This alleviates the restrictive nature of mortgage lending and allows for a buyer to leverage themselves in a time of low rates.  In most of the cases where an asset loan makes sense, the only other option is a cash offer, which unnecessarily ties up assets into a property costing a borrower significantly in lost appreciation and dividends resulting from liquidated assets.

Other fantastic benefits of these loans are that they often require minimal documentation.  Our program at Chicago Bancorp, for example, allows for a client to apply without the encumbrance of a credit check or income verification.  Additionally, the loan is non-recourse, which protects the borrower from entering into a financial sink hole if the market suffers unexpected loses.  Finally, a securities-based loan can even save mone over a traditional mortgage.

Example:

Purchase Price: $2,000,000

Traditional Mortgage

  • Mortage amount of $1,600,000
  • LTV of 80%
  • Interest Rate of 8%
  • Mortgage payment of $11,740
  • Monthly Income of $25,000
  • Debt Service Ratio: 47%

Tough loan these days as far as originating and selling at a good price.

If a collateralized security loan is done for $600,000 and used as a down payment the transaction changes dramatically:

  • Purchase Price: $2,000,000
  • Security loan: $600,000
    • Rate: 3.5%
    • Monthly payment of $1,750 (simple interest and paid quarterly)
  • Regular Mortgage: $1,000,000
    • LTV: 50%
    • Interest Rate of 7.75% (rate is reduced due to lower LTV and lower loan amount)
    • Mortgage payment of $7,164
    • Total Monthly Payment: $8,914

Benefits

  • Monthly savings: $2,826 (24% savings) 
  •  Debt Service ratio: 35%

In the end, there is no perfect loan structure.  Less flexibility in the lending marketplace has made it even harder to find a single solution that meets the complete needs of many borrowers.  This should, however, never stand in the way of a qualified borrower getting the home that they want.   Asset-based lending, represents a good option for overcoming lending obstacles when a traditional mortgage fails to fit the property or the client.