The final rules protect mortgage borrowers from unfair or deceptive lending practices that can arise from loan originator compensation practices.   The rules apply to all persons who originate loans, including mortgage brokers and the companies that employ them, as well as mortgage loan officers employed by banks, credit unions and other lenders.  The rules will:

1. Prohibit payments to the loan originator that are based on the loan’s interest rate or other terms. Compensation that is based on a fixed percentage of the loan amount is permitted.
2. Prohibit a mortgage broker or loan originator from receiving payments directly from a consumer while also receiving compensation from the creditor or another person.
3. Prohibit a mortgage broker or loan originator from “steering” a consumer to a lender offering less favorable terms in order to increase the broker’s or loan officer’s compensation. 

The consumer must be presented with loan offers for each type of transaction in which the consumer expresses an interest (that is, a fixed rate loan, adjustable rate loan, or a reverse mortgage); and the loan options presented to the consumer include the following:

(1) the lowest interest rate for which the consumer qualifies;

(2) the lowest points and origination fees, and

(3) the lowest rate for which the consumer qualifies for a loan with no risky features, such as a prepayment penalty, negative amortization, or a balloon payment in the first seven years.

So what do these new rules mean for the general consumer who is looking at options for a mortgage?  First off there should be more transparency now in the amount of compensation the originator is receiving than there was in the past several years.  Mortgage brokers have been required to disclose their exact compensation for several years now while other lenders have not.  That should change with the new rules and should be a good thing for consumers. 

While these new rules seem like they should only benefit consumers it will need to be seen if they do or not.  The primary reasons why they might do as much harm as good is that they will decrease competition in the mortgage sector, unfairly favor large banking institutions and increase consumer costs for mortgages while also decreasing consumer choice.  The new rules require that originator compensation can only be derived directly from the borrower (origination fees/points) or directly from the lending institution (rebate, yield spread) but not a mix of both.   For example, instead of having 8 different rate and fee structures to present to a client a loan originator may now be limted to only four , depending upon whether they are tied to a wholesale brokerage, bank or credit union and have multiple lending sources to quote from or not.    As we pass April 1st be prepared for new disclosures, new ways of mortgages being quoted and presented and possibly less choice than you were used to in the past.





A couple years ago when the economy was at full steam 30 Year Fixed loan rates were in the upper 5 and low 6% range.   So the question that all home buyers need to ask is how will a rise in mortgage rates affect their purchasing power.  While the exact numbers vary based upon your intended purchase price, I’d like to give you an idea in the chart below.

A .5% increase in the interest rate from 4.875% to 5.375% would result in roughly a $25,000 decrease in purchasing power!  That could be a huge difference in properties to choose from or leave the buyer with limited negotiating flexibility.  

When you also look at the amount of money paid out in interest over the 30 year period of the loan there’s a savings of $40,000 in interest between the two rates for the same loan amount. 

So buyers who are thinking about buying now but holding back perhaps to wait for prices to drop slightly beware!  You may end up negating any gains there by being stuck with an interest rate that’s substantially higher a month or two down the road.

Michael Pollock is an Accredited Buyers Representative, member of the Seattle King County Association of Realtors and Licensed Loan Originator in Washington.  He also works with clients in the Tacoma/Pierce County area – visit EXP there at www.tacomapowersearch.com 

All borrowers regardless of credit scores should be able to get into at least 4.25% with standard 1% origination fees right now and High Balance loans up to $567k should aim for 4.5%.   These rates/prices are still available as we start this week and unless we see some huge positive economic news come out (such as really positive numbers on Friday’s Nonfarm Payrolls & Unemployment Report) they should remain for the first week of August.   If you’re a home-owner and haven’t refinanced in the last year or two you should at least be looking at the monthly savings vs. loan costs of doing a refinance with rates like these.   If you can make up the costs in a year or two and plan on being in the home longer than that then a refinance makes sense. 

For buyers contemplating a purchase but not quite sure whether to jump, here are some very important numbers for you take into consideration.  The chart below shows the decline in your purchasing power if you compare current interest rates vs. those you may encounter 6 months or a year down the road when they go up to historical 30 Year Fixed Averages.

If interest rates rose to 5.5% youd lose approximately $48,000 in purchasing power for the same monthly payment!

While we don’t know how long it will be until interest rates start rising again, it’s not a question of “if” but more of “when”.  You combine these interest rates with the currently low prices available for most homes in King/Pierce/Snohomish counties and it makes for a fantastic time to be a buyer.  While loan programs aren’t as flexible as they were several years ago and most borrowers will need to bring a down payment to purchase, this is almost a once-in-a-lifetime combination of mortgage rates/home prices. 

Michael Pollock is an Accredited Buyers Representative with EXP Realty and  Licensed Loan Originator with Northwest Home Center

Unbelievably low interest rates not seen in most of our life times.  We’re talking about 30 Year Fixed in the 4.25% range, 15 Year Fixed around 3.75% and 30 Year Fixed Jumbo Loans around 5.25%.  If you’re looking to purchase a home you’re going to be able to get a loan at a rate that will likely never give you a desire or need to refinance.  And if you’re one of the few people who didn’t refinance over the last year or two the opportunity to be in the low 4′s can’t be passed up.  

So why aren’t we seeing huge amounts of activity in both purchase and refinance lending?  For refinances there are still home owners that unfortunately have not been able to take advantage of these rates because they are upside down or don’t have employment/income necessary to do so.  The creation of the Home Affordable Refinance Program allows some borrowers to get a loan if they are upside down although it has limitations and not every home owner can qualify.  Unfortunately the people it was mostly created to help sometimes don’t qualify because their loan isn’t backed by Freddie Mac or Fannie Mae or they are upside down more than is allowed by the program, have a non-conventional jumbo loan or perhaps they have no current employment.  There are some reasons why people don’t qualify but it’s in every home owners best interest to double check and make sure they aren’t missing out on an opportunity.

As the tax rebate program reached it’s end there wasn’t a huge glut of purchase activity due to many buyers jumping on the program when it first was set to end in fall of 2009.  There also has been a  lack of purchase activity due to the overall economic and employment conditions we’re all faced with.  Many people would like to buy a home but are concerned about their employment or income and it’s much easier to get out of a rental than face foreclosure.  There’s also the difficulties buyers face in getting financing these days.  Loan programs are much more stringent in terms of credit scores, documentation of income and qualifying debt to income ratios.  Many first time home buyers will need to put at least 3.5% down on an FHA Loan program which offers the lowest down payment option available to most borrowers.  That 3.5% of a purchase price in our metro area can represent a huge amount of money which most borrowers, if they have it, want to keep in reserve  these days.  The lack of first time buyers affects the repeat home buyers who need someone to buy their house in order to purchase another.   So despite these amazingly low interest rates, the level of purchases isn’t likely to explode due to all of the combined factors.   That being said, for those people who want to buy a home now, have decent credit, documentable income and the ability to make a down payment there are home loan rates unlike those we’ve ever seen before.

Michael Pollock is an Accredited Buyers Representative with EXP Realty and  Licensed Loan Originator with Northwest Home Center

Positive economic reports and other financial data during the last week of March pushed mortgage rates from their lowest levels in 2010 to their highest all in one day.  The information and sentiment from the Weekly Mortgage Application Index, Durable Goods Order data and a poor auction of 5 Year Treasury Notes took rates from 4.75% to 5.125% in a matter of hours!  Things got a bit better the last day of the month with employment data that was less than stellar but those improvements were erased the next day as soon as the Fed program ended.  

Mortgage rates then spent the first full week of the month attempting to improve with some mildly positive activity although no dramatic decreases to make up for what was lost the week before.  If you were in process to close on a loan and hadn’t locked your rate, it’s likely that you were either faced with a different rate or different costs than what you may have had on your initial application.  So where will go from here as we move away from the Fed program and towards the expected end of the Home Buyer Tax Credit?

The expectation amongst the mortgage industry is that rates will slowly continue to increase over the next several months.  That of course is dependent upon the overall economy contuining to slowly improve.  As more investors leave the safety of bonds and foray back into the stock market, higher yields and rates will be required in the mortgage industry.  The level of refinancing has fallen and after the Home Buyer Credit ends the number of purchases may also decrease.  That drop in mortgage applications may also contribute to an increase in rates as private investors look for higher returns.   Although most consumers aren’t really feeling the economy “improving” yet, it seems to have stabilized which alone shows some strength.   Economic data and movement in either direction will have a larger impact on rates in 2010 as there will not be government support keeping rates low as there was in 2009.

As rates continue to rise it’s important as a borrower to understand the impact it can have on monthly payments and purchase prices.  See my previous post about the Effect of Higher Mortgage Rates on Purchase Price to learn more.   While a rate of 4.875% for a 30 Year Fixed Conventional is still available, it will require a 720+ credit score, 20% equity and a borrower willing to pay some origination fees.   I encourage all borrowers to not only shop around but also to be prepared to make a move and lock-in if you’re satisfied with the rates you’re finding.  It’s likely that they won’t be going down much in 2010 and their rise is more a question of “when” than “if”.

Michael Pollock is an Accredited Buyers Representative, member of the Seattle King County Association of Realtors and Licensed Loan Originator in Washington.  He also works with clients in the Tacoma/Pierce County area – visit EXP there at www.tacomapowersearch.com 

We are certainly in a tumultous period for mortgage interest rates and that will likely continue next week.  As we near the end of a mortgage market supported by the Fed next Wednesday we’ll transition into one dominated by investors who will likely want higher yields/rates for loans.  If you are a borrower planning to close on a purchase or refinance in the upcoming month, I’d highly recommend locking in your rate before April starts as it seems to be increasingly likely that par rates will be headed towards the 5′s . 

Michael Pollock is an Accredited Buyers Representative, member of the Seattle King County Association of Realtors and Licensed Loan Originator in Washington.  He also works with clients in the Tacoma/Pierce County area – visit EXP there at www.tacomapowersearch.com 

The RealtyTrac report shows that foreclosure filings, which include default notices, scheduled auctions, and bank repossessions declined 2 percent from January. A total of 308,524 properties in the United States received one of the listed notices during the month. This equates to 1 house in every 418. Compare that to January’s ratio of 1 in every 409. That works out to a 10% month over month improvement. However, when comparing data from one year ago (Feb 2009), the ratio is 6% worse. 

James J. Saccacio, chief executive officer of RealtyTrac says, “The 6 percent year-over-year increase we saw in February was the smallest annual increase we’ve seen since January 2006, when we began calculating year-over-year increases, but it still marked the 50th consecutive month of year-over-year increases in foreclosure activity.”

He also noted that this leveling of the foreclosure trend is not necessarily evidence that fewer homeowners are in distress and at risk of foreclosing and gave much credit to foreclosure prevention programs, legislation and other processing delays, which are in effect capping monthly foreclosure activity – albeit at a historically high levels that are not likely to slow in the extended future.

Foreclosure prevention policies and government legislation may be artificially distorting supply and demand equilibrium in the housing market. Because banks are allowing delinquent borrowers to remain in their homes, the actual amount of existing homes inventory is unknown or not reflecting these would be foreclosures (shadow inventory).  From an economic perspective it is much more efficient for a bank to allow the homeowner continue to occupy the property, that way it is kept in a condition that allows for faster liquidation at a future date. This gives  the bank it’s best opportunity to recover lost principle and it’s certaintly a better option than sending the property to auction.

With demand still recovering in the housing market, banks may continue to hold inventory until market demand is more accommodating of new supply.  The question is, will the number of qualified and willing buyers be there to support the market if there is an influx of “shadow inventory”?

We had a couple of scheduled economic reports that were released early enough to sway the direction of mortgage rates on Thursday.  First we got Weekly Jobless Claims from the Department of Labor.  This report provides three measures on the health of the labor market:

1. Initial Jobless Claims:  totals the number of Americans who filed for first time unemployment benefits
2. Continued Claims:  totals the number of Americans who continue to file for benefits due to an inability to find a new job
3. Extended Benefits:  totals the number of Americans who have exhausted their traditional benefits and are now receiving emergency benefits

Since our economy is driven by consumer spending, market participants track employment data to get a sense of economic momentum.  While an increase in jobless claims is a bad sign for the economy, weak data generally helps mortgage rates move lower.  Lender rate sheets came in just slightly worse than yesterday, they are really unchanged for the most part.

The par 30 year conventional rate mortgage remains in the 4.75% to 5.00% range for well qualified borrowers.  To secure a par interest rate you must have a FICO credit score of 720 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee.   If you are seeking a 15 year term, you should expect rate in the 4.25% to 4.50% range.  You may elect to pay less in fees but you will have to accept a higher interest rate.

Friday morning we have Retail Sales, Consumer Sentiment and Business Inventories reports.  Of the three, the Retail Sales report has the highest potential to affect the markets and mortgage rates. Better than expected results would move rates higher while worse than expected results would only improve mortgage borrowing costs slightly.  I continue to advise clients to lock now as rates continue to hold at the best levels of the year and the market shows no willingness to drive mortgage rates lower.

Initial Jobless Claims were better than the prior period, so we snapped the three week trend of ever-increasing new claims. We were also very close to the market estimates. This is typically bad for mortgage rates and would cause them to rise.  However, offsetting that is the Productivity Report. Greater productivity offsets inflation, so interest rates love a good Productivity Report. And we had a positive report with productivity gains at 6.9% which was much better than the market expectations and we saw improved interest rates/pricing late Wednesday into Thursday. 

 The most impactful report is to come on Friday (Unemployment Rate/Non-Farm Payroll) and will have an impact on mortgage rates for sure.  It seems as though lenders are positioning themselves with the expectation of negative numbers (lower mortgage interest rates).  Although if we see better than expected numbers we’ll definitely kiss those 4.75% rates goodbye and say hello to the 5′s again.  Stay tuned and if there’s surprises or big numbers I will post about it.   

For those of you planning to purchase or refinance in the upcoming months, I still encourage you not to wait until rates in the 4’s are a thing of the past which may come as soon as the end of the month with the Fed’s exit from supporting mortgage backed securities.

Michael Pollock is an Accredited Buyers Representative, member of the Seattle King County Association of Realtors and Licensed Loan Originator in Washington.  He also works with clients in the Tacoma/Pierce County area – visit EXP there at www.tacomapowersearch.com 

Note that a .5% increase in the interest rate from 4.875% to 5.375% would result in roughly a $25,000 decrease in purchasing power!  That could be a huge difference in properties to choose from or leave the buyer with limited negotiating flexibility.  With the home buyer tax credit, buyers have one reason to purchase in the upcoming months; the increase in interest rates that is likely to come is another to take into consideration.

Michael Pollock is an Accredited Buyers Representative, member of the Seattle King County Association of Realtors and Licensed Loan Originator in Washington.  He also works with clients in the Tacoma/Pierce County area – visit EXP there at www.tacomapowersearch.com