Procrastinating Refinance Prospects Soon to Miss the Boat

Future home buyers of America, and Americans concerned about the future of their investment, it may be time to turn your frown upside down. Top economists across America representing American Bankers Association's Economic Advisory Committee have a positive forecast for our economy, reported by USNEWS.COM. Although we have heard many other economist, top economist as well I might add, say that the recession, in definitions terms, has already ended. Many of those economist believe that we are on a slow ride in recovery at this point, but the fact is, if the remaining "top economist" in the nation are all on the same boat in regards to where the economy stands by end of the third quarter of 2010, which is what the message from the economist in the American Bankers Association's Economic Advisory Committee have forecasted, we MUST be headed toward "greener pastures" sooner rather than later, right?

Despite the Fed's attempts to keep rates as low as possible to keep the rise of the Real Estate market churning, as the economy makes it's turn to the final back stretch to the finish line of recession, the natural progression of higher rates, which is many times the byproduct of a stronger market, will likely begin it's succession. No worries though, it seems like we have been able to study the history of our economy to the extent that unless a major event occurs, we will be able to manage mortgage rates to avoid any major hikes like we saw in the 80's where rates were well over 10%.

If you have chose to "stop procrastinating tomorrow" on your home refinance and you are one of the ones that has made it through the variety of rate hike scares where rates inched up, but somehow have fallen back down to 5% or just under, your luck is surely running out.

CALL TO ACTION: If your interest rate is at or above 6% and you plan on being in your house more than 3 years, and/or you are currently in a 30yr fixed loan but could afford making about $100-$250 more on your mortgage in which would make a rate and term change to a 15 yr note possible, call your trusted mortgage advisor today! At the beginning of these low rates, I refinanced my own home from a 30 yr fixed with 5.125% rate to a 15 yr fixed around 4.25%, and it only changed my payment by $200 and I'll make up $40,000 more principle in my new plan over the next 7 years than I would have in my old if I stayed where I was at.

FHA Loses Fight to Increase Down Payment Requirement from 3.5% to 5%

Thanks to the NAMB (National Association of Mortgage Brokers), the fight to hold the minimum down payment for a FHA purchase at 3.5% instead of bumping it up to 5%, has been won. Today, the fight turns focus to keeping the annual mortgage insurance costs that FHA charges on loans at .55% instead of moving it up considerably. The mortgage insurance is calculated by multiplying .55% times the loan amount, and then divide that by 12 to get your monthly cost.
My worries about this aren't that it just goes up, but typically this is not something that is temporary...once the market regains strength, why should everyone continue to pay the high cost for mortgage insurance. After all, why not wait a little while and see if all the new changes help offset troubles first. Like that commercial says, "this is how FHA sticks it to the man", but this time, American home buyers are "the man". To hear a live version of the story, go to the Think Big Work Small website.

RESPA Reform Changes...New GFE and HUD-1

Are you ready for the changes that the Federal Government have for us in the mortgage industry under RESPA reform effective January 1, 2010? The new version of the Good Faith Estimate or GFE as we speak in the mortgage business (Martian Language), and the HUD-1 HUD 1 settlement statement or 2010 is what I'm speaking more specifically about.
If you are in or have originated your loan before January 1st, you can continue to close the loan after January 1st under the old GFE/Good Faith Estimate, but the title company will close it on the new HUD-1.
What if you are using two loans to buy or refinance your home...like a piggy back and a first for example? You will issue a GFE for both loans and the title company will have two HUD-1's as well. No biggy there.
The Loan Officer AND the borrower will likely benefit from this if used properly. The design of the change is to empower the borrower a little more by "force", to be more accountable in their process of shopping, and in the same, hold the Lender/Loan Officer accountable for their GFE quote in the beginning. In my opinion, the change is a positive for the lender, but that is because I have never bait and switched or mislead intentionally. In the past, I have had a hard time getting through to borrowers that were a little suspect in the entire shopping process as a whole because of the reputation that comes with mortgage. Therefore, my explanation of how to shop, when they were doing it all wrong, was in one ear and out the other. NOW, the honest loan officers in the industry can relax and let the system force the borrower to shop properly.

The lenders and loan officers that have built their business on smoke and mirrors sales tactics with the GFE's and survived on selling rather than consulting will feel haunted now. Here is why. The GFE, the official one governed by RESPA, is not allowed to be issued unless there is a property...this is good because the uneducated shopper (speaking of buyers and not refinance prospects here) would many times spin their wheels shopping lenders before they ever found a home and then months later when they found the home, they would use which ever company they found the months before. That makes no sense, because a lot can change in a week, must less a month or more down the road. Now, when there is a property and a borrower asks for a Good Faith Estimate, that lender is held accountable at closing by the "system" in the new law. The final documents at closing will put the numbers from the GFE side by side with the final numbers on the HUD-1. If these numbers do not match up, or stay within variance by law, the lender is held accountable for the difference. You see where the dishonest loan officer here will not like the new style? I like it, and many of the loan officers in this industry I am friends with like it because now we don't have to worry about "frisbying" out our GFE wondering if some dishonest sales type is our competition where we'll lose a prospect to a lesser deal and lesser loan officer.
Lets get clear on something. There are circumstances in a transaction process that would require rates or fees to change midway through, and the new laws have made room for those and defined the circumstances that will allow a lender to change the settlement variables from the original GFE. Just make sure that you the borrower, or you the loan officer have your client sign the "Change of Circumstance Affidavit" at least 3 days before you want to close the loan...that is part of the new law. If the APR or fees change from the originally disclosed Truth In Lending or Good Faith Estimate (no called the 2010), you will need to redisclose and sign the GFE and Truth In Lending 3 days before close.

Lowest Interest Rate In History...30 year fixed

What is the standard for the lowest interest rate in history?Freddie Mac, one of the governing bodies of home loans in America, reported that their survey on rates goes back as far as 1971, and 4.78% last week was the lowest National average for a 30 year fixed loan. As of today, the rates have worked their way above that standard again, but word and hope is that they will return and break that record once again before 2009 ends. "Place your bets though", because banks and lenders are VERY stingy with their money right now and the trend shows that the lower rates get, the harder they make it for economic data to influence the recent minuscule drops we have seen compared to the healthy increases from said economic data on the adverse side.
President Obama made note in a recent home refinance talk about his recognition of these record breaking rates, and said further, "But he warned people to watch out for scam artists." He was speaking about the lenders asking for up front money to refinance a home...this is typically a non-reimbursement fee they call application fee. Many lenders collect for an appraisal up front, but this money is sometimes reimbursable and in the end is used directly toward the cost of the appraisal rather than padding the pocket of the "scam artist" type loan person. So, do not get this mixed up with the "scammer's" upfront fee.

Should I pay points/origination on my refinance?

Should I pay points/origination on my refinance?
YES! If you are going to be there for a while.

I'll update this shortly...going to a meeting and can't wait to share. In the meanwhile, read this that I copied and pasted from CNNMoney and their trusty writer Les Christie. He does a great job expressing this.
"CNNMoney.com

Mortgage borrowing today: What you need to know
Wednesday February 4, 1:35 pm ET

By Les Christie, CNNMoney.com staff writer

If you're shopping for a mortgage these days, it's a whole new world out there.
"There have been a huge number of changes over the past few years in mortgage borrowing," said Gibran Nicholas, founder of the CMPS Institute, which trains and certifies mortgage advisors.
Of course, many of the subprime loans that helped fuel the housing boom - those that didn't require borrowers to show any proof of income, or that let homeowners make minimum payments - are are simply no longer available.
But even buyers looking for a traditional mortgage are now faced with different factors to consider.
Here is what you need to know:
Paying up-front points. Borrowers can pay points - one-time, up-front fees - in order to reduce their mortgage's interest rate over the life of the loan. One point represents 1% of the mortgage value.
But they often assume that they should never pay points, according to Alan Rosenbaum, founder of mortgage broker Guardhill Financial. That's a mistake, in his opinion.
When interest rates were high, paying points didn't make sense because borrowers were very likely to refinance after rates dropped. They wouldn't hold their original loans long enough to recoup their up-front costs.
But now borrowers can get a lot more bang for their buck. The old rule of thumb was that paying one point at closing could lower their mortgage's interest rate by a quarter percentage point or so.
"Today the spread is worth a half point to a full point on the rate," said Rosenbaum.
It means paying $2,000 on a $200,000 mortgage at closing can shave as much as a whole percentage point off the loan's interest rate, changing a 6% loan to 5%.
That would save $126 a month, and pay for itself in 16 months. Even if the rate were only lowered to 5.5%, that would still save $64 a month, paying for itself in 32 months.
Still, not everyone is convinced. Rosenbaum recently had a client who chose a 15-year fixed rate loan at 5.875% with zero up-front points on a $800,000 loan, instead of paying a point to get a 5.375% loan.
Had the borrower chosen to pay that point, he would have recouped that cost in about three years, and then gone on to save more than $200 a month for the remaining 12 years of the loan.
Of course, there are caveats. Buyers who are planning to refinance or sell within a few years shouldn't pay points, since the strategy simply doesn't pay in the short term.
Making more than the minimum down payment. If you can afford to put 25%, 30% or more down, should you do it?
Most lenders require a minimum down payment of 20%; anything less and borrowers will need to obtain private mortgage insurance.
And if a buyer could afford to put more than 20% down, it was generally assumed that they should.
The traditional thinking was, "If you have the capital to commit, why not?" said Keith Gumbinger of mortgage research firm HSH Associates. "It will give you a smaller balance to pay off. But now, in light of declining home markets, not everyone would agree with that."
High down payments can be wiped out in severely declining markets.
Nicholas said he knows of a couple in Arizona who put a whopping $400,000 down on a million dollar house a couple of years ago. That gave them, they thought, a nice home equity cushion should they run into financial trouble.
"But prices are down so much, the couple still fell underwater," he said. "It would have been better to conserve that cash in case home prices continue to decline."
Locking in the mortgage rate. Many borrowers choose not to lock in when rates are falling, as they have been, since they assume that the deals will only get better.
But that's often a mistake.
"We almost always recommend that if you have the numbers that make your deal work, then lock it in," said Gumbinger.
His reason: Interest rates tend to jump up much faster than they inch down, meaning that buyers are much more likely to get stuck with a higher mortgage rate than they are to get lower one because they waited.
Besides, locking in at the currently very affordable rates can give borrowers peace of mind, which is no small matter when you're trying to buy a house.
"You'll sleep better at night," said Gumbinger."