Shelter Six: FHA Now Counting Deferred Student Loan Payments

Effective June 30, FHA made it harder to qualify for a mortgage by changing how student loan payments are viewed in underwriting.

Gone is a rule that allowed lenders to NOT count student loan payments deferred for more than one year. Now, deferred payments must be included in the debt ratio calculation.

For deferred payments, the lender has to use the greater of the payment showing on the credit report or 1% of the outstanding student loan balance. The lender can use a payment of less than 1% only if the lender can document the payment and prove it will fully amortize over the student loan term.

The U.S. Census Bureau reports that the homeownership rate in the U.S. is down to 62.9%, the lowest level since the bureau began tracking the rate in 1965.

The main reason for the drop is most likely a factor of demographics and the result of the slow start it has taken many Millennials to buy a home.

Encouraging are survey results from Fannie Mae that show over 90% of Millennials are optimistic they will eventually own a home, pointing toward a trend reversal and higher future homeownership rates.


Rate Update


Last week’s economic data had little impact but mixed messages from various Federal Reserve members stimulated mortgage rates slightly higher.

This Week

The New Home Sales Report is due out on Tuesday, the Existing Home Sales Report on Wednesday, Durable Orders on Thursday, and the second estimate of 2nd Qtr GDP on Friday.

August 22, 2016 by · Leave a Comment

Shelter 6: Retail Sales Plummet

1. Retail Sales have been very strong this year but were much lower than anticipated in July, despite strong car sales.

2. Consumer spending accounts for about 70% of U.S. economic output, so the Retails Sales figure is critical to the economy.

3. Retail Sales were one of the bright spots for the economy in the 2nd Quarter, so investors will be watching this very closely throughout the fall.

4. Foreclosure inventory declined yet again in June to the lowest rate since August 2007 and are down 19% over a year ago.

5. The median existing single-family home price increased in 83% of measured markets in the 2nd Quarter.

6. Supply levels continue to hold back real estate sales.  National listing inventory is hovering around 4.7 months.


Rate Update:

Slower economic growth reduces the outlook for future inflation, so the slow Retail Sales data was positive for mortgage rates.

This Week:

The Consumer Price Index and Housing Starts are due out on Tuesday.  In addition, the minutes from the July 24th Fed Meeting will come out on Wednesday.

August 15, 2016 by · Leave a Comment

Shelter Six: Special Report on the Appraisal Process

Shelter Mortgage only uses the very best local appraisers, but why is this so important?

Big banks and brokers are required to and many other mortgage companies choose to use Appraisal Management Companies (AMC’s).

AMC’s draw from a huge network of appraisers.  Whoever accepts the order first ususally gets the appraisal.  This creates a very impersonal process with little accountability to the real estate agent or Loan Officer involved in the transaction.

Often times, the AMC appraiser will drive from a long distance to complete the appraisal. The result is they often don’t know the area well.

AMC’s drive up the cost of appraisals because a 3rd party is involved, however, the appraisers typically get a pay cut as they only get about half of the collected fee.  Thus, many appraisers feel forced to rush orders just so they can make a similar amount of money.

The AMC’s quality control department can also be very strict and most appraisers fear this.  The result is usually a very conservative appraised value. Stick with Shelter and avoid the AMC headache!


Rate Update

Two highly anticipated economic events last week caused significant, but offsetting, reactions to mortgage rates. The Bank of England announced a new bond purchase program to stimulate economic atvitivy that was well received and influenced rates lower. Friday’s employment report, however, was much stronger than expected showing 255K jobs being added to the economy in July and moved mortgage rates slightly higher for the week.

This Week

Second Quarter Productivity will be released on Tuesday, the Job Openings and Labor Turnover Rates Report on Wednesday, and Retail Sales on Friday.

August 8, 2016 by · Leave a Comment

Shelter Six: Fed Holds Rates Steady

1. The Federal Reserve elected to leave short-term interest rates unchanged at last week’s meeting.

2. The Fed report was less upbeat than expected but recognized strength and growth in both the labor market and consumer spending.

3. Consumer spending was higher than expected in the second quarter, but business investment and the overall GDP both lower than expected.

4. Housing remains strong. June New Home Sales were the best in about eight years and Pending Home Sales also showed a small increase.

5. First-time home buyers now account for 33% of existing home sales, the highest percentage since July 2012.

6. Housing has been a lead driver of economic growth for the last five years and could easily remain in the driver’s seat for the next five years!


Rate Update

Mortgage rates fell last week mostly due to a lackluster Fed report and disappointing GDP data (third straight quarter of growth below 2.0%).

This Week

The ISM National Manufacturing Index is due out on Monday, Core PCE Price Index on Tuesday, ISM National Services Index on Wednesday, and Employment figures on Friday.

August 1, 2016 by · Leave a Comment

Shelter Six: FHA Student Loan Payment Changes Now in Effect

1. FHA is implementing major student loan payment calculation changes effective June 30. Deferred student loan payments must now be included in a Borrower’s debt ratio.

2. If the lender can’t document the actual payment via a statement, then the formula to calculate the student loan payment is the greater of 1% of the outstanding loan balance or the monthly payment reported on the Borrower’s credit report.

3. Did you know? Jumbo fixed-rate financing now only requires 5% down!

4. Sales of existing homes rose in June for the fourth month in a row to an annualized rate of 5.6 million units, the best since February 2007!

5. The strong June sales volume was achieved despite a very low supply of homes available for sale, just 4.6 months (6 months is considered healthy).

6. Home builders are certainly aware of the lack of supply as they have ramped up construction. The Commerce Department reports that there were more houses under construction at the end of June than at any time in the last eight years.


Rate Update

Mortgage rates ended last week a little higher mostly due to the European Central Bank’s decision to not make any changes in monetary policy.

This Week

New Home Sales are due out on Tuesday with Pending Home Sales and Durable Orders on Wednesday. The Federal Reserve also meets again on Wednesday. No change in rates is expected, but the statement from the Fed could have a significant impact on mortgage rates.

July 25, 2016 by · Leave a Comment

Shelter Six: Stocks and Rates Higher

1. With bond yields dropping so low, investors decided last week that stocks were more attractive than bonds and drove the Dow stock market index to a record high.

2. As a result, mortgage rates have pushed back up to roughly the same level where they were at the time of the June 23 Brexit vote.

3. Most investors now think that there will not be another Fed rate hike in 2016.

4. After a slow start to the year, retail sales posted a fourth straight month of solid gains in June.

5. The current homeownership rate is 63.5%, the lowest in 22 years and nearing the all-time low of 63% recorded in 1965, when Census first started tracking the statistic.

6. The peak was 69% in 2003 but Freddie Mac now wonders if the homeownership rate can fall below 50%?


Rate Update

Investors showed a preference for stocks over bonds last week with economic data having little impact. As a result, mortgage rates ended the week a little higher.

This Week

The NAHB Housing Confidence Index is due out on Monday, Housing Starts on Tuesday, and Existing Home Sales and the Philly Fed Regional Manufacturing Index on Thursday. There will also be a European Central Bank meeting on Thursday which could influence U.S. mortgage rates as well.

July 18, 2016 by · Leave a Comment

Shelter Six: Strong June Employment Report

1. With a forecast of only 180K, the economy added 287K jobs in June, the most since last October.

2. This balances out the anemic figure of only 11K jobs added in May, which had been lowest in 5.5 years.

3. The unemployment rate also increased in June from 4.7% to 4.9%, mostly due to the large increase in the number of people who felt the confidence to begin looking for a job in June.

4. With rates dropping so much, now is the perfect time to contact your past customers and let them know that they might want to look into refinancing.

5. Anyone with a 30 year rate of 4.5% or higher will benefit greatly from a refinance. A 15 year option is also a great alternative and of value to anyone with a rate of 4% or higher.

6. Of course, your favorite Shelter Loan Officer is equally able to help anyone you know who may need purchase or refinance information. Any and all referrals are greatly appreciated!


Rate Update

Over the past week, investors continued to seek the safety of U.S. bonds in the wake of the British vote to exit the European Union. This added demand offset stronger than expected U.S. economic data, and mortgage rates ended the week at the best levels in years.

This Week

It’s going to be a packed day on Friday with Retail Sales, CPI, Industrial Production, and Consumer Sentiment all due out on the same day.

July 11, 2016 by · Leave a Comment

Shelter Six: Metro-Atlanta Home Prices Continue to Rise

The latest S&P/Case-Shiller home value figures show Metro-Atlanta home prices appreciating at a faster pace (6.5%) than the rest of the country (5%).

Atlanta home values bottomed out in March 2012 and are now up 57% since that time.

More good news, according to CoreLogic, only 2.84% of metro-Atlanta mortgage loans are now 90+ days delinquent. National figures are also at the lowest level since 2008.

A little bad news, according to GA MLS, metro-Atlanta has the worst shortage of homes for sale in the U.S.

U.S. stocks recovered nicely last week and are now approaching “pre-Brexit” levels.

Expectations of a Fed rate increase have disappeared, and traders are now talking about a possible rate cut. Rate cut speculation is always good for mortgage rates.


Rate Update

The British vote to exit the European Union remained the primary influence on U.S. financial markets over the past week. Expected looser monetary policy from global central bankers has pushed mortgage rates down to the best levels in years.

This Week

The Fed minutes from the June 15 meeting are due out on Tuesday, the ADP Employment Change and the ISM National Services Index on Wednesday, and the Employment Report on Friday.

July 5, 2016 by · Leave a Comment

Shelter 6: “Brexit” Sends Stocks and Mortgage Rates Reeling

1. The shocking British vote to exit the European Union (“Brexit”) sent both stocks and mortgage rates reeling on Friday.

2. Many believe “Brexit” could lead to slower economic activity, higher tariffs, slower hiring, and less capital investment but it is impossible to predict how severe and far-reaching the shockwaves will reach.

3. One positive outcome will almost certainly be lower inflation, which always means lower rates.

4. The uncertainty of “Brexit” is heightened by the prospect of other countries in Europe proposing similar referendums.  The future of the European Union is certainly on shaky ground.

5. Back home in the States, despite low inventory, Existing Home Sales rose in May to best level since 2007.

6. The median home price also rose to the highest level on record with the “number of days on the market” also falling to a record low.


Rate Update

“Brexit” dominated the market activity last week with other economic news having little influence.  Mortgage rates ended the week lower and near the best levels since early 2015.

Looking Ahead

The reaction to the British vote will continue to influence the markets.  In addition, the 3rd estimate for 1st Quarter GDP is due out on Tuesday, Pending Home Sales and Core PCE Price Index on Wednesday, and the ISM National Manufacturing Index on Friday.

June 27, 2016 by · Leave a Comment

Shelter 6: “Trended Credit Data” to be Rolled Out Soon

1. “Trended credit data” is a term you will hear more of in the months ahead and is a new type of credit analysis where trends in a borrower’s credit history will be reflected in credit scores.

2. This technique will go back two full years to pick up trends such as how quickly borrowers pay off various accounts and seasonality patterns. The focus will be more on trends and less on a point in time snapshot.

3. Fannie Mae was initially slated to launch “trended credit data” on June 25th but the launch has been postponed until August. Common thought is that this analysis will boost credit scores and be a good thing, but it certainly has the power to do the opposite and hurt others as well. Stay tuned.

4. Last week’s Fed meeting went as expected with the Fed making no rate changes.

5. Retail Sales have bounced back strongly with three straight months of nice gains. Consumer spending is growing at a greater than 3% annual rate in the 2nd Qtr compared to only 1.9% in the 1st Qtr.

6. Core inflation in May was 2.2% higher than a year ago and has been holding steady over the last few months. This is a little higher than 2015 but still very low and at a great level for the economy and rates.


Rate Update

Last week the markets were focused on the Fed meeting and concerns about Britain leaving the European Union (“Brexit”). Both turned out to be very favorable for mortgage rates, which are now down to the best levels of the year.

This Week

The main influence on mortgage rates is likely to be the “Brexit” vote on Thursday. A vote for the UK to exit the European Union is expected to be positive for rates, while a vote to remain negative. The major economic reports due out this week include Existing Home Sales, New Home Sales, and Durable Orders.

June 20, 2016 by · Leave a Comment

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