MisterVA Travels to Courthouses & Covered Bridges

Rate Spike Chokes Off Refinances

Concern over massive repayments of performing A-paper mortgages seem to be fueling the recent rate spike in fixed rate mortgages.  A 45 basis point rise in rates recently is a huge increase in such a short period of time.  A recent discussion of these events on CNBC indicated that large banks were selling many prime mortgages and the increase in rates may in part be geared to reduce early prepayments.  Prepayments usually come in the form of refinancings and there is a correlation between actual rates and expected prepayment volume.  Replacing higher yield with lower yields certainly places additional stress on lenders' bottom lines amid the higher delinquency rates with the higher risk mortgages.  Prime mortgages are performing very well and the incidence of delinquency has remained relatively static over the past decade.

Will rates subside?  Probably they will.  But it may take some time to get down to the lower rates we saw in mid-January.  And if they do return to that level, those folks that are waiting for them will pounce quickly.  This also holds true for VA & FHA loans.  Those have a slightly higher delinquency rate, but the streamline programs they both have available mean quick turnaround times when the time is right.  Borrowers will need to act quickly, though, because you never know if there will be another rate spike to choke off refinances.

Everyone Needs a Vacation

It really doesn't matter who you are.  You need to be sure you set aside a time to get away each year.  In my area, business is slow this time of year, so it is the perfect time to take a break and get re-charged.  The golf clubs haven't been touch since late October, so I will break them out in less than 10 days and get in a few rounds in the Florida sun.  As we go to the same place each February, it will also be a time to renew friendships wtih folks who go to the same destination as we do annually.  I won't be taking in any spring training games this year unless on a whim and I am not planning on any trips across Alligator Alley to see any hockey games, either.  So, it should be a time to just relax.  Pipelines will wait and upon my return, the pace will surely pick up as it does each year in the normal business cycle.  Remember that everyone needs a vacation.

More PMI Changes Announced

MGIC has announced another round of tightening which will be effective March 1st.  PMI will not be available to folks with FICO scores under 620.  This is another reason to be doing FHA loans.  While this change does not affect the state HFAs at this point, it does signal that obtaining a mortgage if the credit scores are less than sterling will be pricier.  For those keeping score, you are now looking at pricing adjustments by Fannie & Freddie for FICOs of less than 680, risk based premiums for PMI for FICOs less than 680 and now the unavailability of PMI for under 620.  LTV adjustments have also occurred recently and sometimes it feels like we are ants at a picnic and there are big guys with shoes and eyes as wide as saucers.  We'll get through it okay, but we have to inform our customers about these impending changes and be ready to adjust if the picture is not pretty.

Conventional Streamlined Refinancing

One way of saving money in a refinance is to use the same lender who originated your loan or the same lender that services your loan.  A streamlined refinance can cut the costs and the time needed to lower your rate and your monthly payment.  Especially if you bought a bargain and have added equity, this may be the best way to go even if you might be able to save 1/8% on the rate somewhere else.  The key is that no new appraisal is needed.  No cash is added to the loan other than for closing costs.  The property must be a 1-2 unit primary residence.  The borrowers must remain the same.  A credit report is usually required along with current paystubs.  The lender should have the original findings from the Automated Underwriting of the loan.  If you can save 1% on the note rate, this might be an attractive option for you.