Englewood Real Estate Watchers Note Rise in U.S. Jumbo Loans

2-27-jumboloan-300x223Inside Mortgage Finance is a periodical that precisely lives up to its name: Englewood residential real estate professionals can turn to it for the latest word on national trends inside the mortgage industry. Admittedly, this usually makes for pretty dull reading for outsiders (that is, everyone else); but one story in last week’s edition was interesting enough that it was picked up by the general business press.

The topic was jumbo loans. In Englewood real estate circles, the issuing of jumbo loans is of particular interest because of their indicator status. Jumbos are the ones with mortgage amounts exceeding the limits for government-backed loans. They’re also known as ‘nonconforming’—and like all the other non-conformists in life, they don’t quite behave like everyone else. Englewood jumbo loans tend to be slightly harder to qualify for than run-of-the-mill mortgages, and as a rule carry higher interest rates. If their share of the home loan market grows, it indicates that high-end home sales are improving.

And that’s what happened in the U.S. in 2014, according to IMF. “Jumbo Lending Stronger than Overall Market, Hits Highest Share in 10 Years” was the headline in a report that pegged fourth quarter jumbo loan volume at $67,000,000,000. That’s a lot of high-end real estate!

When The Wall Street Journal picked up the story, they pointed to a decrease in mortgage lending overall, but pointedly less so for jumbo loans. Bank of America reported a 3% growth in the number of first-time home buyers who took out jumbos in 2014—and applicants were a younger bunch, too: their average age decreased from 46 years to 44. Wells Fargo Home Mortgage, the largest jumbo provider, observed a similar trend: more first-timers taking out jumbo loans.

If this has local real estate watchers wondering whether the popularity of jumbo loans in Englewood will follow the national trend (and if so, why), there was at least one straightforward explanation. HSH, the housing and mortgage data firm, reported that by the end of this January, the average interest rate for a 30-year fixed jumbo mortgage “dropped below 4% and was at a historic low of 3.92%….” With rates like those, the WSJ wrote, “Low interest rates are spurring more older affluent Americans to consider a mortgage.”

You don’t have to be in the jumbo market to seize the financial advantages this winter’s favorable real estate climate offers. Just call me!

 

Littleton Property Buyers Choice: On the Deed/On the Loan

Littleton Property Buyers ChoiceHome buyers direct a series of major decisions when it comes down to finalizing their Littleton property purchase. Among the most important are two with decisive ownership and financial consequences: who will be the primary borrower for the mortgage; and who will be named on the deed?

The answers to these questions are the opposite of the fine print details that few of owners ever need to concern themselves about. These cast defining roles in determining the eventual ownership of the Littleton property and in assigning financial responsibility for loan repayment.

Whose Name Goes On the Loan?

Determining who is to be the primary borrower may not be as simple as you would think. After all, one person might have the excellent credit needed to insure the best interest rate, while the other person currently brings in a higher annual income—providing the cash flow boost that enables a sufficient mortgage. It is often necessary for both members of a couple to sign on the dotted line to get a Littleton property financed. A loan officer will walk buyers through the process, explaining which combination will offer the greatest loan amount at the most favorable terms.

Whose Name Goes on the Deed?

It’s important to keep in mind that the deed is almost completely separate from the loan. Even if only one person signs for the loan, several people can be listed on the deed. Placing a name on the deed shares ownership of the property. That can be helpful in the event of an untimely death or to avoid probate during an estate settlement, but there can also be drawbacks.

Since those named on the deed share in title rights to the property, that can empower them to prevent a sale—and also leave the property vulnerable to their debts. That’s why it’s important to be clear about all outstanding obligations before adding people to a deed, lest a pre-existing debt result in a lien being filed against the property. It’s also good to remember that until the loan is paid in full, the bank or lender also has an ownership interest, which is why the bank can take possession for non-payment.

Making the Decision

Making the most of your Littleton property is a continuing planning exercise that begins with these first ownership decisions. For individuals as well as couples, the multiple issues that come into play have financial and tax ramifications that merit careful consideration.

Before buttoning up those final decisions, I always advise clients to consult with their accountant and lawyer to get the whole story—it’s a story which begins with your first call to my office!

Englewood Mortgage Watchers Eye ‘Wealth Building Home Loan’

Englewood Mortgage Watchers EyeSomething new is stirring in the ordinarily hidebound world of residential mortgage offerings: a new way of approaching the financing of home purchases. If successful, it might well shift the way some Englewood mortgage contracts are written.

The experiment is known as the “Wealth Building Home Loan,” and it addresses a home-ownership problem that has been talked about for a long time, with little being done to solve it. The issue in question is how to unburden new homeowners from spending years in a situation that bears more resemblance, financially, to renting than to owning— especially during the first 3 to 5 years. For low- and moderate-income mortgagees, that’s the difference between sinking into more debt and actually building wealth. After all, every dollar that goes toward interest is lost, while dollars that pay down principal are investments.

According to Edward Pinto, one of the authors of the WBHL, often during the opening years of a 30-year loan, “68% goes to pay interest.” In the new program, 77% of monthly payments go to pay off principal—with the result that in a short time, new homeowners have a much larger equity stake in their homes. And, it is hoped, a sizeable increase in pride of ownership: “a stake in the game.”

It sounds good, but you might be wondering how this could be possible. Is this just a ‘pie in the sky,’ feel-good idea that will never see daylight in the real world? Apparently not. The pilot program is being put into action by some serious players: the American Enterprise Institute (if that sounds like a conservative outfit, it is) and administered by the Neighborhood Assistance Corporation of America (if that sounds like a liberal outfit, ditto). And it’s being funded by Bank of America and Citi Mortgage—neither of which would be likely to bankroll some fly-by-night scheme.

The mechanics of this kind of mortgage work out like this. First, it’s based on a 15-year term, which of course speeds the rate at which equity builds; and second, it’s a mortgage that carries a very low interest rate. Something for nothing? Not quite: the concept is to
change the underwriting standards to tilt away from credit history and toward recent payment history and residual income, thought to lower lender risk
eliminate the down payment altogether, instead allocating that initial cash toward “points”: buy-downs of the mortgage’s interest rate to .5%, (or even 0%)!

It boils down to an approach that could be a win-win. Borrowers (even those who suffered credit black marks during the economic downturn) could be newly eligible for a home loan, and because lenders pocket the interest rate buy-down amount, a proposition they might find acceptable.

Should Englewood mortgage applicants expect this deal to be available next week? Not likely: it’s in the pilot phase. But if it seems to work out, it could be a shot in the arm for homeowners who can manage a slightly higher monthly payment. If you would like to chat about today’s home loan availability (or any other current Englewood real estate doings), I hope you’ll give me a call!

Englewood Mortgage Interest Rates Could Become a Missed Opportunity

1-7-mortgage-300x225Englewood’s mortgage interest rates have been so low for so long that there is the definite possibility that the real value they represent—for both Englewood home buyers and sellers—may now be being taken for granted.

It’s only natural. If you believe that past history is the best predictor of future performance, last January’s common wisdom that mortgage interest rates in 2014 would head up to at least 5% or more wouldn’t have fazed you a bit. One quick glance at the squiggly lines on a chart showing either 30-year or 15-year fixed mortgage interest rates reveals a pronounced downward slope. Ever since mid-year 2007, it looks like a playground slide. It does level off at the end, starting around three years ago; but if you take in the longer view, back to 1982, you see an even steeper tumble—all the way down from (gulp!) 18%! Only the bravest child would dare climb the ladder to that playground slide…

For a couple of years now, most of us assumed the bottoming-out of Englewood mortgage interest rates would reverse soon enough. But, as The L.A. Times pointed out on New Year’s Day, “…instead of the year ending with 30-year mortgage rates at 5% as many had projected, it wound up at an average of 3.8%…” Now, although some industry leaders (like the Mortgage Bankers Association) again expect mortgage interest rates to end 2015 at around 5%, most forecasts “now come with more sheepish comments about clouded crystal balls.” And The Times also acknowledges that some observers think rates could stay low, or even decline.

“I’ve been wrong about fixed mortgage rates all year,” the chief economist for Moody’s Analytics is quoted as having grumbled. Now “he wouldn’t be surprised if fixed mortgage rates are near 4.5% at the end of 2015.”

With this newly-voiced uncertainty about future rises, coupled with last year’s rates refusing to budge from the familiar comfort of basement levels, it would hardly be surprising if most folks have simply adjusted to today’s Englewood mortgage interest rates—and allowed their own real estate planning to proceed accordingly.

If so, that’s likely to become a real forehead-slapper when they look back on it…possibly in the near future. Low mortgage interest rates in Englewood are in actuality a rare gift: a true windfall for those able to capitalize on them.

If you are contemplating buying or selling an Englewood home anytime in the future, I do hope you’ll give me a call to discuss today’s market—and the opportunities that are here (and right now). As we know from our own playground experiences, once you find yourself at the bottom of the slide, sooner or later you’ll be climbing up that ladder once more!

Englewood Mortgage Applicants May Find Welcome Rule Shift

Englewood Mortgage Applicants May Find Welcome Rule ShiftThe financial press has been on it for a while: in September, Bloomberg News was pointing out that FHA mortgages to borrowers with weaker credit scores had plummeted 19% in the previous nine months. Something, you could sense, was about to give—but, per Bloomberg, “Washington regulators and major banks continue to haggle…”

True, home prices were up, which put a smile on Englewood homeowners’ faces. Yet the number of sales was less than overpowering. In reaction to the housing bust, regulators had tightened the screws on mortgage lenders, causing them to raise requirements for borrowers—Englewood mortgage applicants included. So although the price rises were encouraging, the difficulty in getting mortgages became a drag on the number of home sales.

Now the latest rumbles could be potentially breakout news for Englewood homeowners and investors—indeed, for anybody with an inkling to sell a Englewood home. It’s not a done deal, but on Saturday we got more than a hint of what’s likely to come. Lead rumor-monger: The Wall Street Journal.

“Mortgage Giants Set to Loosen Lending” was the front page headline. Fannie Mae and Freddie Mac were the giants: the two mortgage titans are essentially creatures of the federal government, regulated by the Federal Housing Finance Agency. They are owned by the Feds and some private shareholders (who seem to sue each other frequently). The long and the short of the story was that they are close to an agreement with mortgage companies—a deal that would protect lenders and make it easier for borrowers with weak credit to access home loans.

When Fannie and Freddie say ‘boo,’ the banks shriek in terror (and not just when it’s this close to Halloween). Their lending guidelines govern a huge proportion of the nation’s mortgages. They impact Englewood mortgage availability—and therefore the number of qualified potential home buyers. Following the worldwide financial meltdown, a lot of worthy people found themselves in that “weak credit” category. It couldn’t help but affect Englewood mortgage volume, and therefore real estate activity. Sales suffer.

Although the Journal relied on unnamed sources, the tone of the story (and its top-of-Page 1 positioning) sounds like the principals are sending up a trial balloon. They might be testing public opinion, since the new agreement would amount to a partial rollback of the strictures created in reaction to the loose mortgage governance that preceded last decade’s meltdown. The new guidelines would make it “easier for lenders to offer mortgages with down payments of as little as 3%” for some borrowers.

Fannie and Freddie’s new generosity may have something to do with the fact that they have reclaimed tens of billions of dollars in penalties paid to them for past underwriting mistakes. The new agreement would also offer some protection for lenders on that score, which would lower mortgage creators’ overall risk calculation. If that happens, it should be the break many Englewood mortgage applicants have been awaiting.

If you have been looking for a positive sign to list your Englewood home, or if you are a potential homebuyer who’s been discouraged by tight Englewood mortgage lending, your wait may be over. Per The Journal, “The moves could be announced as soon as this coming week.” Give me a call if you’d like an update on that and on the overall current situation!