Taking Action

When it comes to mortgage rates, sometimes it’s better to “act now”.  For clarification, it is no longer the time to “act now”.

On Tuesday, mortgage rates fell to their lowest levels in 4 years. It happened because the Fed said it would “employ all available tools” to resuscitate the economy.  Not because they cut the fed funds rate, as you know from previous conversation the two are not connected at all.

Quick Reversals

On Wednesday, however, the mortgage markets had second thoughts.

After considering the long-term implications of a near-zero percent Fed Funds Rate and the cumulative cost of government intervention to-date, suddenly, traders grew fearful that U.S. government action would devalue the dollar and lead to inflation — the enemy of low mortgage rates.

As a result, mortgage markets unwound. Quickly.

At first, the exit was a slow and orderly. Then, without warning, investors began a full-on sprint for the exits. By the end of the day, mortgage rates were higher by as much as a half-percent. Nearly all of Tuesday’s big gains were erased.

Learning From This Experience

In hindsight, the reversal Wednesday wasn’t all that surprising — it’s the same trading pattern we’ve seen twice already this year. The first time was after the Fed’s “surprise” rate cut in January, and the second time was after the federal takeover of Fannie Mae and Freddie Mac in September.

If history tells us anything, sharp rate drops tend to be followed by immediate bounce-backs.

But, unfortunately, not every would-be refinancing homeowner saw the increase coming. While those that locked at the first opportunity to save money are sitting pretty today, the rest that “waited for rates to go lower” are likely kicking themselves about it.

Going forward, mortgage rates may fall, or they may not. We can’t possibly know. But we’ve now seen the pattern 3 times now — when mortgage rates plunge like they did Tuesday, they rarely stay that low for long. When you find a rate you like, get in and get locked as soon as possible.

Sleeping on it for even one night may end up costing you dearly.  I’m sure this speaks volumes to many mortgage rate shoppers!

Be Prepared for the Next Drop

As you may have heard in prior posts, we’re unique at Four Legacies Mortgage.  We offer free mortgage management services.  This means that when rates drop like they did, we go on a locking spree.  History shows that mortgage rate drops like this only last a few hours at most.  Waiting isn’t smart.  Locking in and moving quickly is.

Check out more about our auto-lock program here.  I think you’ll really like it.  Feel free to drop me an e-mail if you have any questions about our program.

Also, don’t jump and refinance after you miss the lows.  That’s just silly.   Often times when we’re looking to refinance, we just want to save money on the interest rate.  However, what if you initiate the process and lock at say 5.375% and then rates fall to 4.5% again.  Would you be bummed?  I thought so.

Rates will eventually come back down with the volatility we see in the market.  The key is working with a loan officer that understands the mortgage market.

In the meantime, keep your seat belts on.  This will be a bumpy ride.

(Image courtesy: The New York Times)

Are You Ready for the Next Refinance Boom?

Are You Prepared?

Have you heard that mortgage rates might be dipping to as low as 4.5%?

It seems like every time we see mortgage rates dip, we only see a 1-4 hour window to capitalize on the savings before they move up.  Yea, you’re not alone.  Many others have missed on this too.  That is why our team is prepared to lock you before rates start moving higher next time!

Let Us Take Care of You!

You have a full time job.  You’re not a loan officer, so why try to play the part of one?  We see where mortgage rates are moving before the changes ever hit a rate sheet.  Let us help you decide when to lock the best mortgage rate possible!

By hiring us to manage your mortgage (for free), you won’t find yourself scratching your head on why you missed the chance to lock in a record low rate.  When the next big opportunity comes along, we’ll lock it in for you!   That’s all there is to it!!

What We Need From You

We’ve learned that during these short windows of time, there isn’t enough time to call and talk with all of our favorite clients (like you).  The Tyler Osby Team concentrates on locking loans before rates increase.  If you are looking to take advantage of this free service, all we need is you to is the following two things:

1) Please send us an e-mail.  This e-mail should include your name, phone number and address.  We’ll respond with the form you see below.
2) Once you receive our e-mail,  please fill out and fax back the form shown below.

1. Your Target Lock Rate. This is the threshold of where you’d feel comfortable locking.  If rates improve beyond that, we’ll lock you in at the better rate when that happens (obviously).  Right now, I’m recommend clients put 5.25% .  Enough to get excited about
2. Your Loan Term. This is the length of the loan that you’re looking for.  Such as a 30 year fixed or 15 year fixed rate.
3. Your property address. This is the address of the property you’re looking to lock the low rate for.
4. Borrower(s). This is you and your co-borrowers (spouse) full name.
5. Social Security Number. We will need this in order to pull credit and lock your loan.
6. Date of Birth. In the section where it says ‘Date’, please put your date of birth.  We’ll also need this to pull your credit report when we lock your loan.

The Tyler Osby Team Auto-Lock Agreement – Get more Business Plans

We’ll be in Touch

As soon as we receive your request, we’ll touch base with you and go through the next steps in getting you prepared for the upcoming boom.

Remember, time is of the essence.  The faster we move, the more likely we’ll be able to lock your low rate loan.  We’ll be locking loans in the order that clients get us the appropriate information.

Don’t Keep This a Secret!

Our service is unique.  Please share this unique opportunity with any friends, family or co-workers that you know own a home.  We review each client’s personal short and long term goals before we recommend refinancing, but for those who refinancing makes sense for, this is a great opportunity to get them lined up!

Direct them to this blog post by linking to: http://www.wealthwithmortgage.com/386/prepare-for-the-next-big-mortgage-rate-drop/

Or you can have them e-mail us with questions at tyler@tylerosbyteam.com.

We’re hear to help as many clients take advantage of this unique upcoming opportunity as possible.

The Decision

On Tuesday, the Fed decided for the third time in a row to keep things unchanged.  The Fed Funds Rate will remain at 2%.

Each time the Fed has a meeting, they release a statement to accompany the actual decision on rate.   It might surprise you, but the words are often more powerful than the action or inaction of the Fed in regards to interest rates.

The Actual Statement:

What Was Said?

Well, when the Fed releases their press release, they give their summary of how different sectors of the economy are doing individually.

As Dan Green over at The Mortgage Reports summed it up:

The Fed….
On Wall Street: Strains have “increased significantly”
On Employment: The workforce has “weakened further”
On Household Spending: It’s “softening”
On Inflation: It’s “been high”

What’s it Mean to Mortgage Rates?

As soon as the Fed made their decision to stay flat, mortgage rates immediately climbed as much as .50%.   Traders interpret the Fed’s inaction as a danger for inflation.  Especially since they openly said it’s ‘been high’.  They know it’s a problem, but they’ve got bigger problems to worry about than inflation.

Were You Too Greedy?

I’m going to go ahead and say it – if you were one of the consumers “Waiting to see if things get a little lower”, you’ve missed the boat – again.   With markets being as volatile as they have been over the past year, you have to see that these opportunities to lock in stellar rates have lasted between 6 and 36 hours.   Time isn’t exactly on your side.  Take your gains and move on.  You won’t remember what rate you locked in twelve months later, trust me.

There Will Be Another Opportunity

I’m confident this isn’t the last chance to lock in at a stellar rate.  However, if you’re following the news, you’re going to be late on taking action.  Your mortgage needs to be under management by a professional. The market is fast and unpredictable.  When opportunities present themselves, you need to know about it and be able to take action.

Where I Come In

My job as a Certified Mortgage Planner is to help manage my clients existing mortgages (at no cost) and keeping them informed on opportunities (like last week).  It is important to know that there are few mortgage professionals that actively manage their clients mortgage.  If you didn’t get a call or e-mail directly from your mortgage professional when this opportunity presented itself, you should consider hiring my team.

Our mortgage management services are free.  When an opportunity presents itself to refinance (and it makes sense), then we refinance and I earn my fee.  It’s no different than any other financing transaction you’ve ever done – my team will just reach out to you instead of you reaching out to us.  Is that cool or what?

If you’d like to take advantage of our unique mortgage management services, please contact me.  I’d love to adopt your mortgage and give it the hands on attention it deserves.  Trust me, your decision to contact my team will pay off big time.

Parsing The Fed Courtesy of Wall Street Journal

The most asked question I first get from my clients is “What is your mortgage rate?”  They are of course, assuming every consumer gets the same mortgage rate. A very common misconception. I hope after reading this, you’ll have a better understanding of why each rate quote is a custom rate quote and more importantly – there is much more to making a decision on your mortgage than just finding the “best rate”.  This post also should be a great read for Realtors and financial planners shopping around to protect their clients best interest.

What Goes Into a Mortgage Rate?
With all lenders (bankers, brokers, hard money, etc) there are multiple questions that have to be answered before putting together a rate quote. Here’s a quick list of some questions that MUST be answered before we can begin to properly serve you (even though many lenders break the rules and give you a inaccurate quote from the start):

• Where is the property located? (City, State, Etc.)
• How will this property be occupied? (Owner occupied, second home or investment property)
• Is this a purchase or refinance?
• What is the condition of the property?
• What type of property is it? (Single family home, condo, town home, high rise, duplex, triplex, etc)
• How much land is the property being sold with? (if it’s a huge acreage, it won’t be a conventional loan)
• IF it’s a condo – is this condo project approved? (I don’t expect clients to know, but we have to find out!)
• What are taxes on this property?
• What is insurance on this property?
• Is this property located in a flood zone?
• How much is the property worth? (Sales price AND appraised value)
• How much money will you be putting down? (…is it your own? Is it gift funds? Is it seller down-payment assistance?
• How many properties do you already own? How many of those are financed? By whom?
• What would you like the loan amount to be?
• How long of an amortization would you like on the loan? (10 years, 15 years, 20 years, 30 years, 40 years, 45 years?)
• How long of a note would you like? (for balloons… 7 year, 10 year, etc)
• What terms would you like to have? (fixed or adjustable?)
• IF you’re considering adjustable, what length would you like to have it fixed? (6 months – 10 years)
• IF you’re considering adjustable, which index would you like to have your ARM tied to?
• What type of loan are you looking for? (fully amortizing, interest only or negative amortization)
• How quickly are you looking to close on this loan? (lock period and picking the right lender..especially in today’s market)
• Do you have a preference on which bank services your loan? (some clients like some banks and hate others
• What is your credit score? (We need a full credit report. I won’t issue a pre-approval unless it’s in Four Legacies Mortgage’s name. We can’t close a loan for you with someone else’s credit report.)
• What’s your debt to income ratio? (We will calculate this for you when we have your income and expenses fully documented).
• Do you plan to escrow for taxes and insurance?
• Can you document your income? (and make the numbers work doing so!)
• Can you document your assets? (some programs require certain reserves, etc.)
• Will you be getting private mortgage insurance (PMI)?
• IF you’ll need PMI – which type will you get?
• Will you be getting a second mortgage or Home Equity Line of Credit (HELOC) with this new first mortgage

These are just an example of the questions (I believe there are 29 listed above) that need to be addressed when putting together a custom rate quote.

Why is it important to go through all of that work before quoting a rate?
Simply said – I don’t want you to be telling your friends and family that the rate you ended up getting on your loan was (fill in the blank) higher than you were told in the beginning. It just won’t happen if the right questions are asked up front.

Have you been quoted a rate without answering any of those questions? It may not be accurate!

What Most Consumers Do
All too often, when clients call (many) other mortgage lenders – they just ask for a rate quote. What happens is the lender quote absolute PAR (industry term for base rate) and doesn’t take into consideration any of the additional adjustments on interest rate they’re quoting. It’s sort of like a dumbed down bait and switch. However, nobody can get mad because the customer never gave the lender enough information to properly quote the rate (even though the lender never explained they would need it).

I don’t mean to rant on the subject, but every homeowner/buyer should know this before shopping for a loan. Without this information, they’ll simply go with the first person to quote the lowest rate.

Rates Change Multiple Times Throughout The Day
Here’s the real problem. If you’re really trying to call around to each bank/mortgage company (or even a couple), you’ve really got a challenge. You’d have to catch each one of them at the same time, with the same information and HOPE they actually know what they’re doing when they quote you a rate. Too often, mortgage rates are misquoted and programs are a misfit for your financial goals (a whole other story). IF you find a ‘better rate’ with a certain lender, that rate’s only good until the next re-price. The next reprice is guaranteed the next day (if not sooner.. much sooner).

Don’t Worry… Everyone Else Asks It Too!
Hopefully after reading through this, you realize that asking a lender for a mortgage rate is just what we’ve been taught to do. Trust me, 5 years ago – it’s what I did (before I was in the mortgage industry). There are just too many factors that go into a mortgage rate. If a lender isn’t asking the right questions – they may say you’re qualified for something you wouldn’t qualify for at all. I don’t know about you, but I’m not a huge fan of being under served.

Then Why Do Lenders Give Me a Rate Quote When I As
Short answer – I have no idea. Long answer – I personally think it’s because they think they have to. I personally think it’s no different than walking into a doctor and telling them you need to know why you’re sick without doing any examination. People get sued for that right?

I cannot control my competitors or the rest of the industry, however I can operate my practice the most professional way I know how to. I’ve personally decided to take the time to get to know a client and more about their long term plans far before I ever throw out an interest rate. Honestly, wouldn’t you rather feel more comfortable knowing a loan will better serve you in the future? I work extremely hard to earn my clients trust and work hard for them to make them raving fans about our services.

What You Should Look For In a Mortgage Planner / Porch Pitch
When you’re shopping for a loan, it’s extremely important that you’re working with someone who gets “it” and gets YOU. A mortgage is a crucial decision and a large part of your financial future. I take that very seriously (but I still have some fun). You should work with someone you can trust. Someone who knows what to watch to see the direction of interest rates. Someone that’s watching the right economic news and knows how it will impact mortgage rates. Someone that will educate you through the process.

Consider yourself on a search for a new team member. You probably already have someone managing your assets, someone providing you with tax advice. Many folks leave out a debt advisor. You need someone that cares about your finances as much as you do. A mortgage professional that will stick with you even after their paycheck clears the bank.

It also helps to have someone on your team that connects you with other professionals. I believe in surrounding myself and my clients with great resources. Everyone needs advice from time to time. Specific service providers. Resources at the local TV stations, newspapers, etc. I love connecting people. I’m always trying to create valuable connections between my clients and referral partners.

The bar has been raised on what to expect in the mortgage industry. Make sure that you’re working with one of the ‘new thinkers’ that are managing mortgages after they close. Trust me, the right advice will save you thousands. It won’t cost you a penny more.

So, you (like everyone else) want to know what mortgage rates are going to do this week.  I’m here to help.

Have you ever asked a loan officer if they know what the mortgage market is doing and they respond with:

“Well, if I only had a crystal ball.. I’d be able to forecast exactly what they’ll do…”

The bad news is, they have no idea what they’re doing.  It’s a horrible line that just says “I’m not familiar with the factors that effect mortgage rates, but I can quote you a stellar rate right now!”   The good news is, you’ve found someone that does get it.  If you want to capitalize on the best mortgage rates with the best terms, you need to work with someone who can tell you what effects rates and when they will change.

Seriously, you need to stop rate shopping and start advice shopping. It will save you thousands more.

Here’s this week’s WealthWithMortgage economic calendar (still struggling on photo quality…I’m a mortgage guy, not a graphics guy.)

If you want to see market updates (and random rants) as they come available, please ‘Follow Me’ on Twitter! 

Oh, and I can help you if you’re considering buying or refinancing a home and are shopping advice – the phone’s always on (515-991-7102). 

This morning, The Office of Federal Housing Enterprise Oversight (OFHEO) announced it’s reducing Fannie Mae (FNM) and Freddie Mac’s (FRE) 30% capital surplus requirement to 20%.  Basically, they don’t have to have as much money in reserves, so they’ll be able to buy up some more mortgages and mortgage-backed securities.

By OFHEO making this ‘small’ change, it should free up as much as $200 billion of immediate liquidity to the market for mortgage-backed securities.  MarketWatch suggested this move should allow both Fannie and Freddie to buy or guarantee about $2 trillion in mortgages this year.  Wow.

If you’ve been following me on Twitter, you’d know that rates have increased as much as 1/2% since Monday.  If you haven’t been following me on Twitter, today – you might consider starting. The bus of low mortgage rates has left the station and it’ll be a while before it returns.

To understand why rates have been climbing this week, you first have to understand what mortgage rates are based on.  Mortgage rates directly correlate with value of mortgage backed securities (MBS).  Rates are NOT based on the 10 Year T-Note, stock market, or the fed funds rate (FFR).  These common misconceptions are due to the lack of visibility of MBS.  In order to receive live bond quotes, you have to pay to subscribe to a service (and it’s not cheap).

Ok, now for the specifics on WHY rates have increased (so much) this week.  When you buy a bond (like a mortgage backed security), you buy it and it will have a pre-determined amount paid over time.   If inflation is creeping up, that pre-determined payout is going worth less to the owner of that bond in the future.  Make sense?  When investors see inflation as a concern, they sell off their mortgage bonds and put their money elsewhere. 

The higher the value of a mortgage backed security, the lower an interest rate will be on a mortgage.  If the value falls, rates increase.  As I had mentioned, some individuals in my industry give advice to follow the 10-Year T-Note the same way I follow mortgage bonds.  I’m not one to laugh at other’s expense (actually, I sort of do), but take a look at what happened today (especially if you were watching the 10-Year T-Note):

 A loss of 103 basis points for MBS is a big one.  Rates worsened between 1/4% and 1/2% just Thursday.  If you or your loan originator were following the 10-Year T-Note, you missed the bus… and you will be spending thousands of dollars more over the life of your loan because of some bad advice.

Are you and your loan officer watching the right indicators?  Do you know when the best time to lock is? Is someone managing your mortgage?  Are you receiving top notch advice? Does your lender have access to live, real time, mortgage bond quotes?

If you answer no to any of these questions, we should chat. I love this stuff, seriously.  I look like a kid at a candy store when I’m watching bond quotes… It’s sick, it’s sad and you should take advantage of it.

I’m often asked about what makes Four Legacies Mortgage and myself any different from our countless competitors.  The truth of the matter is, I don’t like the answer ‘our advice is better or more timely or that we are more professional than the rest’.  These things should be required to even be in consideration (even though they often aren’t really there). 

I would say the BIG thing that makes Four Legacies Mortgage different than anyone in our market, is that we will help you actively manage your mortgage EVEN after it is closed.  We do not generate transactions in our practice, we create long term relationships with our clients.  In the interest of not sounding too cheesy and sleazy, I want to be totally upfront – I’m still a regular guy.. I just happen to take my clients financial situation extremely seriously, much more than others in my profession.

So, if you’ve ever received a mortgage.. I’ve got a few questions for you:

1. Do you know the terms of your mortgage? (EXACT rate, length, fixed or adjustable, balance)
2. Do you know your credit score? … and most importantly, Do you have a gameplan to improve it?
3. Do you know what your home is currently valued at?
4. When was the last time you heard from the mortgage lender that financed your home?
5. Who do you call with questions in regards to your current mortgage?  Do you talk to someone you personally know?

I could keep going with questions, but I think my point is obvious here.  I don’t baby sit my car insurance policy. I also don’t sit on e-trade all day making stock trades.  I trust my team of carefully selected professionals to tell me if I need to change coverage or when to buy or sell stock.  Why is it that everyone thinks a mortgage is a do-it-yourself project?  I think it’s because most people don’t think they have a choice.  If they knew, why would they choose to watch mortgage backed securities (MBS) instead of enjoying their freetime?

Truth of the matter is, I spend a lot of my time studying the market and determining which direction it’s moving.  I lock ahead of rate increases and know when to recommend floating to take advantage of gains. I hint at the direction via Twitter, but I don’t give away the farm either.  Yea, it’s easy to say that we’ve done a good job – but check out our track record.  I really am enveloped in the mortgage business, I love what I do and I love helping my clients save money over time by implementing a mortgage plan that works.

If you or someone you know has a loan that has been abandoned, please let me know.  I’d be happy to step in and help manage it.  At Four Legacies Mortgage we believe mortgage management should be the standard to which other lenders are held, and we’re willing to work to show you why.  No, we don’t charge anything extra for our management services.  I’d love to help you and your family implement a mortgage plan that gets you where you want to be the fastest.

Just a few weeks ago, we had a dip in interest rates of about .5%.  Did you get a call?  My clients under active management that could benefit from the rate reduction did.  If you’re located in Iowa, and have a mortgage on your home, don’t wait until you miss the next big chance.  Let me get you under management today!