Fannie and Freddie Fees Drive Mortgage Rates Higher 2011

January 17, 2011 By Leave a Comment

Mortgage Giants Fannie Mae and Freddie Mac announced that they are expecting more revenue from mortgage loan production in 2011 to cover their costs. Where is that money coming from? The 2011 Consumer.  The additional fees they will begin charging in April are marked as Risk Based, however they will affect ALL borrowers – no matter what the downpayment or credit scores are.

In a Dec. 23 memo to lenders in its network, Fannie announced that it had decided to impose a new schedule of higher add-on fees, similar to what Freddie Mac — the other huge congressionally chartered mortgage investor — rolled out to jeers from the real estate industry just before Thanksgiving.

The new fees come as no surprise, I guess considering that each month the taxpayers are dumping billions of dollars into the Agencies to keep them afloat.  Even though the Congress made enormous changes with the Dodd Frank Banking and Consumer Protection laws last summer, Fannie and Freddie were left out of the legislation.  Later this month, the Obama administration plans to submit long-promised proposals to Congress on what to do with the two — phase them out, restructure them, privatize one or both of them…  or maybe they will come up with some other out of the box solution.

It’s important to remember that Fannie and Freddie still have their hand in over 2/3 of ALL new mortgage lending done in the United States.

The new fees scheduled to start this spring,  don’t appear likely to make financing a home any easier. Some potential buyers who have high credit scores and hefty down payments may be surprised that even they are being targeted for higher “risk-based” fees.

Consider these examples of how Fannie’s revised list of loan add-ons will affect borrowers:

$300,000 mortgage, above 800 Middle Credit Score, cash down payment of just less than 25%

With the changes in April you will be hit with a $750 fee equal to 1/4% of the loan that we don’t currently charge.

$300,000 mortgage loan, credit score of 679, down payment less than 20%

Fannie will soon begin hitting you up for 2.75% in add-on fees — a staggering $8,250 solely attributable to your FICO and LTV ratio.

That’s $1,500 more than what you are currently being charged.

But these fees are just the start of the multilayered, cumulative risk-based pricing system that both Fannie and Freddie employ. Every perceived risk factor in a loan transaction receives its own separate add-on fee, all of which get totaled up for your final loan charges.

We’ve been telling folks to lock into a mortgage loan NOW… and we still think this is the BEST advice we can give you!

If you, your family or your friends are considering a mortgage loan for a home purchase or a refinance – please call Steve and Eleanor Thorne, 919-649-5058

Share and Enjoy

  • Facebook
  • Twitter
  • Google
  • Digg
  • Email
  • RSS
Filed Under: Housing News Tagged With: , , , , ,

Fed Mandates, QEII and Mortgage Interest Rates in NC

January 16, 2011 By Leave a Comment

Following a sharp rise in interest rates from mid-November through December, Freddie Mac is now predicting that interest rates on 30-year fixed-rate mortgages will hit 5.5 percent in the fourth quarter of the year, up half a percentage point from the 5.0 percent forecast last month.

The little green mark is approximately where the FED would like to see mortgage interest rates at the end of the year… which is lower than the Freddie Mac Forecast.

Why is the Fed Target LOWER than the Freddie Mac Forecast?  Because the FED (and most Economist) realize that the Housing Market is an important part of the overall health of the Economy. 2011 is expected to be the year that we see the MOST bank foreclosed properties hitting the local real estate markets, obviously creating even more supply and likely driving prices (Values) down in many areas.

QE II and Federal Reserve Mandates

Again… the Fed knows that Mortgage Interest rates in the upper 3′s lower 4′s brought much more interested buyers into the market. So why are mortgage interest rates headed to 5.5%?

The Fed has two mandates: keeping prices stable and creating an economic climate for low unemployment.   Prior to taking his current job, in one of his published papers, Ben Bernanke made the case for the Fed to target a specific inflation number, and the number that came to be accepted as his target was 2%.

In his famous helicopter speech in late 2002, he assured us that inflation could not happen “here,” even if the short-term rate was zero, because the Fed would move out the yield curve by buying large amounts of medium-term bonds. This would have the effect of lowering yields all along the upper edge of the curve. This became known as quantitative easing (as a reminder, Mortgages are sold as Mortgage Backed Security BONDS – and the government is suppose to be the LARGEST PURCHASER of mortgages).

In Jackson Hole last summer, Fed Chairman Bernanke, pleased with the effect of the first round of Fed Buying (QE I) announced the second round of liquidity-injecting quantitative easing (QE2). In that speech, in later speeches in the fall, and in op-ed pieces he said that such a program would lower rates.

Then a funny thing happened on the way to QE2:  long-term rates began to rise all over the developed world. As Yogi Berra noted, “In theory, there is no difference between theory and practice. In practice, there is.” It’s got to be driving Fed types nuts to see the theory of QE, so lovingly advanced and believed in by so many economists, be relegated to the trash heap, along with so many other economic theories (like that of efficient markets). The market has a way of doing that.

So, in an interview on CNBC with Steve Liesman last week Bernanke was asked about one minute into the clip (link ) about the little snafu that, following QE2, both interest rates and commodity prices have risen. How can that be a success? Ben’s answer (paraphrased):

“We have seen the stock market go up and the small-cap stock indexes go up even more.”

Really? Is this the third mandate of the Fed?  Foster a rising stock market?

I wonder what the Fed’s target for the S&P is for the end of the year? That would be an interesting bit of information. Are we going to target other asset classes – because clearly targeting long term mortgage interest rates hasn’t worked!

Understand, I am not against a rising stock market… but the Stock Market should not be the Fed’s FOCUS.!  It’s certainly not a reason to add $600 billion to the balance sheet of the Fed when we clearly do not understand the consequences.

“If it looks like they’re making up the rules as they go along, it’s because they are.”

Bottomline For Mortgage Interest Rates in NC for 2011

Because the FED policy has been largely ineffective, and because Freddie Mac and Fannie Mae will be adding risk level fees to mortgage rates starting in April… we believe that there’s more room for mortgage rates to rise than fall.  We are telling clients to lock into a mortgage rate now.

When rates do start to rise, we expect that they’ll rise quickly. There is lots of concern about ARM (adjustable-rate mortgage) resets.  Fortunately, most of the ARMs adjusting in 2011 are tied to LIBOR.  This will likely result in LOWER payments for homeowners with this type of ARM – at least until the next adjustment.

The other concern is that mortgage guidelines in North Carolina will continue to get tighter.  It will be harder to be approved in 2011.  With new Federal Consumer Protection laws, there’s extra scrutiny by banks. The minimum requirements, including credit score and Credit HISTORY are higher,  the documentation and verifications for self-employed borrowers is tougher, and that decreases the buyer pool.

If you are considering a purchase in Raleigh or Cary, NC – or you want information about mortgage interest rates in NC, please call Steve and Eleanor Thorne 919-649-5058.

Share and Enjoy

  • Facebook
  • Twitter
  • Google
  • Digg
  • Email
  • RSS
Filed Under: Housing News Tagged With: , , , , , ,

USDA Home Loan Maps Wake Forest and Rolesville NC

August 17, 2010 By 1 Comment

It can be difficult to tell exactly WHERE you can purchase a home that qualifies for USDA Home Loan Financing.  These are 100%, no money down loans, with NO Monthly PMI (which makes them cheaper on a monthly basis than FHA, and you CAN make a downpayment if you want to…), and in most of the cases we see… the SELLER is paying the Closing Costs!

For information on qualifying for USDA Home Loans in NC, Click Here

For information on where you can purchase USDA Home Loans in other parts of the Triangle, click here.

Many of our competitors are NOT doing USDA Mortgage Loans – but we are closing them every week! Here’s a list of counties in NC where you can get this 100%, no money down loan.

If this is an area you are considering for a home, Call us 919-649-5058!  We work with TOP Real Estate Agents in this area who are familiar with the market, how to negotiate for the Seller to Pay Closing Costs, and how to get you the best price!

Call Steve Thorne 919-649-5058 USDA Home Loan Expert if you have questions on Qualifying for a USDA Home Loan in Wake Forest NC and Rolesville NC. We have the best mortgage rates available in North Carolina

Share and Enjoy

  • Facebook
  • Twitter
  • Google
  • Digg
  • Email
  • RSS
Filed Under: USDA Home Loans Tagged With: , , , , , , , , , , ,

Have We Hit The Bottom On Mortgage Rates in NC?

August 4, 2010 By 2 Comments

I read a ton of Economic commentary and as such, I can sometimes come across as a “Debbie Downer.” The reason for this is simple.

I like low mortgage rates – I’m constantly looking to see if they are going lower… and in general, as mortgage interest rates move lower, it’s BECAUSE of BAD NEWS in the Economy.

Most people don’t want to read commentary from someone who is delivering more bad news, because they get enough of that from the media. So instead of pointing out that home sales are down, and consumer confidence is off, and the Economist that Obama most listens to (Mark Zandi) thinks we need more jobs to make markets move higher…

Let’s look at the Bright Side of Life!

  • Mortgage Rates are at an ALL TIME low.  I’m talking lower than World War II when our grandparents all bought houses.
  • Housing Prices are at an ALL TIME low. You’ve never been able to get a better deal on Real Estate.  That’s a fact I don’t think ANYONE can disagree on!

The question then becomes… are we at the Bottom?

I am a syndicated writer.  I write for Zillow and Lender 411, and I’ve been saying lately that”this is not my first rodeo” – meaning, I’ve seen at least 7 other Refinance Booms in my mortgage career.  They all follow a pretty predictable path (If you want to know if you should refinance now, click here).  Rates get low, they pop back up, they get a bit lower over a gradual period of time, and then one day – they don’t get any lower.

At some point, the banks are just not interested in buying mortgage loans, over a 30 year period, that have rates below a certain percent of profit.

It looks to me like we are there. (Can I Get A Refinance Under 4.25%, click here)  I think we are at the bottom of this cycle, and that means if you are waiting for a lower rate, you are wasting valuable time! In a few hours, the ADP jobs numbers will be released, and Friday, August 6th the NonFarm Payroll Numbers will be released.

These reports, if AT ALL positive will likely move mortgage rates higher.

If you want to PURCHASE, and, and, and the moon is right, and you have money to cover your closing costs, and your down payment - you might be able to work out a temporary buy down so that you would have payments starting at 2.5% the first year, 3.5% the next year and 4.5% (4.8 APR) for there on out.  But that will be the exception, not the rule. (click here for more info on a 2-1 Buy Down)

So, if you are considering a Home purchase in Raleigh or Cary, or you want to refinance a mortgage in NC – please don’t wait, call Steve and Eleanor Thorne 919-649-5058.  We’ve seen these situations before, and you need to act while rates are where you want them to be!

Share and Enjoy

  • Facebook
  • Twitter
  • Google
  • Digg
  • Email
  • RSS
Filed Under: Housing News Tagged With: , , , , , , , , ,

Which Way Will Mortgage Rates Go Week of 6.7.2010

June 8, 2010 By 1 Comment

Robert Rauf, a friend of ours to the north put together a great review of what Economic and Financial reports are in play this week – and how they might move mortgage rates! We often remind our customers that we are a pretty sadistic group – and “Bad News in the Economy is Good News For Rates…”  Depending on where you are – you might be looking for bad news on CNBC (with us) looking for lower mortgage rates!

Last week we saw a pretty stagnant couple of days with a little bit of up on Tuesday and a little bit of Down on Wednesday and Thursday, leaving us pretty much unchanged by time Friday morning came along. The markets seemed to be waiting on the Employment report to sink their teeth into for some direction. Friday’s Employment report came in looking pretty darn strong with oodles of new jobs, the rate dropping to 9.7%… but if you dug just a little you could see that over 400k of the new jobs created were census workers (temps basically) and there was almost NO hiring in the private sector.

So the good news number was actually bad news, and if you read my blogs at all you will know that bad news is good news for interest rates and we ended the week with a gain of 21/32nds for Fannies keeping fixed rates for highly qualified buyers in the high 4% range.

This week starts off a little slow and has a good mix of data to chew on and some auctions to mix things up along the way. Here is this weeks calendar:

  • Monday June 7: No news day and in the absence of any economic data we have a pretty flat market that started off slightly negative and is now slightly positive for the day.
  • Tuesday June 8: Auction # 1 of the week with $26 Billion in 3 year notes. Most of the shorter term auctions have been fairly well bid, I anticipate we will see the same this week and this will most likely be supportive of steady rates.
  • Wednesday June 9: April Wholesale Inventories expected up 0.6%. Snooze factor here, no one really cares about an April number in June, not likely to be a market mover.
  • Wednesday: Auction #2 with $21 Billion in 10 year notes. Normally I would be concerned over this much supply in a longer term note, but the flight to quality we have seen that has dropped rates to levels we have now seems to still be there with the concerns in Europe, I expect we will see demand for this as investors (foreign and domestic) look for a safe place to park their cash. This will probably lead to a steady market for the day.
  • Wednesday: Fed releases its Beige Book. This report puts together the 12 districts of the Federal Reserve. There are some glimmers of hope and improving economy in the reports, but employment remains in the ugly range so it will likely overshadow any signs of improvement in this report. This is not a likely market mover.
  • Thursday June 10: Jobless claims for last week expected down 5,000. This would put the number at almost 450,000. above 400k is still very recessionary, so it is supportive of steady to possibly lower rates.
  • Thursday: Auction #3 with $13 Billion in 30 year bonds. Same comments here as yesterdays 10 year… Most likely will be well bid in a flight to quality.
  • Friday June 11: Retail Sales expected +0.2% Ex Auto +0.1%. If we are shocked here by a stronger than expected number we will likely see a sell off that would give back all of the gains we saw last week. As forecast it is supportive of steady to possibly lower rates.
  • Friday: April Business inventories expected +.5%. This is a case where April is not Ho-Hum.  If this number comes in lower than expected it is a sign that business needs to stock up, that would be positive news for the economy and we would see rates climb on that news. If it comes in as reported it will be the ‘ho-hum’ we would expect from an April Number.

We continue to benefit from Stock market woes and the insecurities in Europe. Investors seem to be continuing to pull out of equities, currency and European debt and tossing it in a safe place to weather the storm. Luckily the USA and the Dollar are considered a safe haven to park cash. This has benefited us in the form of a flight to quality which is likely to keep rates low for the short term. BUT… this flight to quality can disappear in an instant.

No one really likes to put money in a 3 year note at 1.1% or a 10 year at about 3%, Investors want more.  The parking of cash in a flight to quality is not for the yield, it is to preserve cash.

Once investors confidence is restored the cash will flow back out of our credit markets faster than it went in causing rates to jump overnight. That being said, Just lock in- we are at generational lows right now and the greedy will get hurt here.

Robert Rauf Mortgage Banker  NMLS ID# 248937

www.RobertRaufHomeLoans.com or my blog: http://activerain.com/blogs/rrauf

If you are shopping for mortgage rates in NC – please call us! The preditory lending laws in NC are different than any other State in the Union – ask a local mortgage lending expert  Steve and Eleanor Thorne, Mortgage Banker in Cary , 919-649-5058.

If you are an Economic Junkie like we are – click here for more ideas about the direction rates are going and what the Oil Slick might mean to housing trends.

Share and Enjoy

  • Facebook
  • Twitter
  • Google
  • Digg
  • Email
  • RSS
Filed Under: Housing News Tagged With: , , , , , , , ,

First Time Homebuyers – Rates Going Up

August 11, 2009 By Leave a Comment

Time to BuyWe talk to First Time HomeBuyer’s everyday that tell us, “We’re Looking!”  Well – here’s my advice… HURRY UP!!

The Tax Credit is going to “go away” at the end of November… and everybody is telling you NOW is the right time to buy – and that’s a FINE reason… But I think there’s ANOTHER incentive.

I wrote recently about the fact that rates are NOT getting below 5%. The Fed is meeting today- and there’s likely to be a statement tomorrow that they are NOT going to “prop” up the mortgage backed security market after September when the program is scheduled to end. 

The FED has been purchasing mortgage backed securities, and because of that – well, the more they buy, the lower rates go.  So as they’ve given no indication they will continue purchases, rates have started heading up! 

FIRST TIME HOMEBUYERS!  NOW is the time to purchase a home! You can use the USDA home loan program in NC (it’s a 100% loan!),  or FHA or VA (you wouldn’t believe the number of Vets that FORGET this great benefit!)!  Call us, Steve and Eleanor Thorne, to help you with qualifying for a new home!… we have the lowest mortgage rates!

Share and Enjoy

  • Facebook
  • Twitter
  • Google
  • Digg
  • Email
  • RSS
Filed Under: FHA Mortgage Loans, First Time Home Buyer, USDA Home Loans, VA Mortgage Loans Tagged With: , , , , , , , , , , , , ,

FHA Loan Limits Change 1/1/09

November 10, 2008 By 2 Comments

We're Not KiddingAccording to the Mortgagee Letter Published this week, HUD is changing the Maximum Loan Limit for Wake, Johnston, Franklin and Harnett Counties.  The change is based upon our average sales price, which has dropped a bit per National Association of Realtors, on Page 48 of their 88 page report – the Triangle will be in for this change at the beginning of the year.

Because our median sales price is lower – our FHA loan limit will go to $271,050 on January 1, 2009.  This means that at the end of the year, the maximum loan in Wake County, Franklin, Harnett or Johnston is $271,050 – down from the current maximum loan of $295,000.  These calculations are based on the Housing Bill that passed Congress in August.  Orange, Person and Durham Counties stay at their current limit of over $336,000!

UPDATE:  In February of 2009 – the FHA raised the limits back to the $295,000 limit!  Talk about CONFUSING!

The downpayment requirements for FHA also change at the end of the year, and if you’re buying that means you will be putting 3.5% starting on January 1st.

If you have questions about qualifying for a mortgage loan, or you want to check rates and see if we can beat what your loan officer is quoting you – call us!

Share and Enjoy

  • Facebook
  • Twitter
  • Google
  • Digg
  • Email
  • RSS
Filed Under: FHA Mortgage Loans Tagged With: , , , , , , ,

WOW! FED LOWERS BY 75 Bps – must be bad!

January 22, 2008 By Leave a Comment

refi steve thorne online

Dark clouds are brewing over the family farm…

Prior to the Fed’s move a couple of minutes ago – the 10 year was already trading at a level that would allow us to offer 30 year fixed mortgage rates at 5.0% or lower.  I would be surprised if we do not see rates at or below 5% when rates come out in a couple of hours.  This is HUGE!

This is surreal!  While the fed is lowering by .75% Paulson is speaking and saying the President’s package is Robust!  A $500 check is NOT Robust!  And then Paulso says (in response to the Fed Lowering) that the Fed is nimble and this should add CONFIDENCE to the market?!? Hugh?

And last week – another one of those surreal moments… Cramer sighted the same solution my SON suggested in his ECON Final last month!

According to Cramer, it’s the collapse of the mortgage and mortgage-backed securities insurers — like

MBIA [MBI  8.55  ---  UNCH  (0%)   ] , Ambac Financial [ABK  6.2  ---  UNCH  (0%)   ] , PMI Group [PMI  6.47  ---  UNCH  (0%)   ] , MGIC [MTG  14.11  ---  UNCH  (0%)   ]– that’s hurting the financials so much and causing the paralysis in the market. “I think these are the companies that are the lynchpin of what’s wrong,” he said.

Cramer offered a plan that called for a government handling of the pre-packaged bankruptcy of these companies and a guarantee of 50 cents on the dollar for all $500 billion in insured loans. Even if every loan defaults — “which is way, way too negative,” Cramer said — it will take just $250 billion to get the economy moving again.

It’s a fun time!  If you are interested in buying, selling or refinancing property please contact us!

Steve and Eleanor Thorne  919-649-5058  We offer today’s best mortgage rates on a home in Raleigh


Share and Enjoy

  • Facebook
  • Twitter
  • Google
  • Digg
  • Email
  • RSS
Filed Under: FHA Mortgage Loans Tagged With: , , ,

Why I think Rates Will Go UP!

January 8, 2008 By Leave a Comment

mortgage loans cary ncSo the Fed announced that they are thinkin’ about maybe lowerin’ their rate at the end of the month. That’s nice.

Here’s My Concern With It…  They are lowering rates because the housing market is still tanking in many areas of the country (not mine thank goodness!) and that means fewer taxes collected… it’s a BIG DEAL, don’t get me wrong.

But just because the Fed lowers by .75%… Do not get sucked into believing that mortgage interest rates will go below 5.5%! How soon we forget! FANNIE AND FREDDIE are starting to add their “special fees” to borrowers with less than 680 credit score!  Once priced into the loan – rates for the MAJORITY OF BORROWERS will be 1% of interest OR MORE higher than the going rate!

ADD TO THAT the fact that FICO is changing it’s model!  My personal opinion is that the scores are not going to go HIGHER with the new system…

So effectively we NEED more than the little “sprinkle” the FED is likely to give us for rates to REALLY go much lower!!!  We will REALLY need Fed Funds rates at 2 o 2.5% in order to TRULY help the economy!

Share and Enjoy

  • Facebook
  • Twitter
  • Google
  • Digg
  • Email
  • RSS
Filed Under: Housing News Tagged With: , ,