An Abundance of Weak Economic Data

May 25, 2011 by · Leave a Comment 

The economic data released over the last week fell far short of investor expectations. The most significant report, April Industrial Production, was unchanged from March, which was well below the consensus forecast. Manufacturing output was hurt by a shortage of parts from Japan due to the earthquakes. The Index of Leading Indicators declined for the first time since June 2010. The Philly Fed Manufacturing Index declined to the lowest reading since October 2010. The housing sector data also showed weakness as Existing Home Sales, Housing Starts, and Building Permits all declined in April (see graph below). Across the board, the economic data released last week was weaker than expected and contributed to mortgage rates declining even further.

Portfolio Lending – Common Sense Solutions That Help You Get to Closing

May 19, 2011 by · Leave a Comment 

In today’s world, very little in the mortgage industry is open to interpretation.  When it comes to originating and underwriting mortgages, there are specific rules and guidelines for everything.  This creates a very rigid, inflexible system.  The only relief available in the mortgage industry today is when a mortgage lender can make a loan out of their own portfolio.  This enables the lender to use common sense decision-making as they make up and play by their own set of rules.  A portfolio lender has this flexibility because they plan to keep the loan in their own portfolio of loans serviced and not sell the loan in the secondary market.  Most lenders do not have this sort of flexibility but we are proud that our parent company gives us the flexibility to originate portfolio loans when needed.

Portfolio loans are ideal for:

  • Homebuyers with unique situations pertaining to their income or assets.
  • Unique properties that don’t fit the Fannie Mae / Freddie Mac or FHA mold (such as a non-warrantable condo).
  • Properties in need of repairs or improvements that need to close before the repairs or improvements are made (common with Foreclosure / Short Sales). 

 Although our portfolio program does not have extensive, rigid rules, here are a few of the program requirements:

  • Minimum 20% down payment
  • Good to great credit required
  • Programs offered are 3/1 and 5/1 ARM’s fixed for 3 or 5 years and then rate can change annually
  • Both Conforming and Jumbo loan amounts

 Our portfolio loan product offers common-sense underwriting that may be just the difference you need to help you close your next sale!

Maximum Loan Limits in Metro-Atlanta

May 19, 2011 by · Leave a Comment 

Here are the maximum loan amounts in metro-Atlanta for Conventional, FHA, and VA loans.

Conventional (Fannie Mae / Freddie Mac)

1-Unit:         $417,000

2-Unit:        $533,850

3-Unit:        $645,300

4-Unit:        $801,950

* These limits are unchanged since 2006

FHA

1-Unit:         $346,250

2-Unit:        $443,250

3-Unit:        $535,800

4-Unit:        $665,850

* FHA Up-Front Mortgage Insurance can be financed over and above these maximum loan amounts

VA

All Units: $417,000

* VA funding fee can be financed but must be included in the maximum loan amount

* For loan amounts between $417k and $1M., borrower required to put 25% down of the amount over $417k

Will Higher Inflation Impact Mortgage Rates?

May 19, 2011 by · Leave a Comment 

April’s Consumer Price Inflation Index (CPI) released last week showed inflation up 3.2% from one year ago.  This is the highest annual rate in 2.5 years!  Core CPI, which excludes food and energy, increased at a 1.3% annual rate (see chart below).  While Core CPI remained well below the Fed’s target range of around 2%, it is up 1.2% over last month and 0.8% over the end of last year.  Thus, Core CPI is also trending higher.   

Normally, a report such as this would be a major alarm to investors and cause rates to shoot up.  However, get this, mortgage rates actually fell a hair after the news.  Everyone knows that inflation is negative for mortgage rates.  What the heck is going on and how can this possibly be?   

The likely answer is that investors expect that the majority of the increase in inflation has already taken place.  Fed officials have maintained that they expect the inflationary effects of higher oil prices to be “transitory”, and the recent drop in oil prices has supported the Fed’s position.  One year ago, oil prices were around $70 per barrel but in April the price has averaged about $110 per barrel, an increase of more than 50%.  So far in May, oil prices have averaged only about $100 per barrel, and investors don’t expect that oil prices will rise 50% over the next year.  There is a fairly strong correlation of oil prices to mortgage rates, so hopefully oil prices will continue to fall.  Another factor worth mentioning is wage growth, which has been minimal in recent months. For these reasons, despite April’s strong report, current inflation expectations remain relatively low and, thus, mortgage rates have stayed low as well.