Fannie Mae Guideline Changes

codyw8@gmail.com — Mon, 26 May 2008 10:56:00 GMT

Changes to Fannie Mae Guidelines

Fannie Mae has announced a new underwriting model to take effect June 1. There are several changes, some for the better and some for the worse.

Fannie Mae generally sets underwriting standards for "conforming loans". Other than FHA, VA, and a small number of other programs, meeting Fannie Mae guidelines is necessary for the homebuyer to get a "good rate".

Although the conforming universe has tightened considerably in recent months, financing is still readily available at very good rates for the well qualified borrower. These changes have not been directly related to the subprime and Alt A problems, and they have been far less drastic.

Among the changes:

- Maximum allowable debt-to-income ratio will be lowered in many situations.

- Time since a foreclosure will be five years. The old rule is two years.

- 60 days late on a mortgage within the past year will be a deal killer.

- Minimum credit score will be 580. Many lenders have already gone to this.

On the positive side:

- Several "A minus" credit situations, which had been ineligible, will now be eligible, including manufactured home purchases and cash-out refinances on rentals.

- Self-employment will be treated a bit more favorably.

The transition from old rules to new will be handled as follows (according to at least one lender; expect practices to vary): New files initiated before June 1 will be usable through September. Thus, I would encourage anyone looking for financing to begin the process before June 1. Then, the old rules would apply. New applications after June 1 are stuck with new rules.

IN OTHER WORDS, SOMEONE WHO EXPECTS TO NEED FINANCING ANYTIME SOON SHOULD BEGIN THE PROCESS ASAP. This will keep all their options open.

Mortgage Bond Foecast For The Week

codyw8@gmail.com — Tue, 20 May 2008 20:10:00 GMT

Several reports are scheduled to hit the wires this week, with the potential to make for more good or bad days in the Bond Market. A big market mover may come Wednesday at 2:00pm ET, when Ben Bernanke and the Fed release the Minutes from their last meeting on April 30th. These minutes often give us greater insight as to what Bernanke and the Fed may be thinking about inflation and the state of the economy.

Remember when Bond prices move higher, home loan rates move lower...and vice versa. Despite some declines in the early part of the week, Bonds were able to rally back as you can see in the chart below. I'll be watching closely to see if Bonds can remain above the layer of resistance at the 50 and 100-Day Moving Averages.

Chart: Fannie Mae 5.5% Mortgage Bond (Friday May 16, 2008)

Interest Rates Make a Sudden Drop

codyw8@gmail.com — Sat, 03 May 2008 15:35:00 GMT

Long-term mortgage interest rates declined Thursday, and the benchmark 10-year Treasury bond yield increased to 3.76 percent.

The 30-year fixed-rate average sank to 5.72 percent, and the 15-year fixed rate dipped to 5.29 percent. Meanwhile, the 1-year adjustable rate fell to 5.9 percent.

The 30-year Treasury bond yield rose to 4.5 percent.

Rates and bonds are current as of 7:15 p.m. Eastern Standard Time.

Mortgage rate figures are according to Bankrate.com, which publishes nightly averages based on its survey of 4,000 banks in 50 states. Points on these mortgages range from zero to 3.5.

Mortgage Interest Rate Myths

codyw8@gmail.com — Mon, 21 Apr 2008 18:45:00 GMT

Mortgage Interest Rate Myths

This may come as a shock to many borrowers, but it's absolutely true. Mortgage interest rates are not set by the Federal Reserve and, contrary to popular belief, mortgage rates are not directly tied to the yields of US Treasury bills, bonds, or notes – including the 10-year Treasury Note. That's right. Despite what you might hear in the media, mortgage interest rates are actually set by lending institutions, and are based solely on the performance of mortgage-backed securities.

For years now, the media and inexperienced loan officers everywhere have suggested that the 10-year Treasury Note, a government-backed security, is directly tied to mortgage interest rates, that the two are separated by a specific interval – which is simply not true. The graph on this page, which shows interest rates for 30-year fixed-rate mortgages and the yield for the 10-year Treasury Note for 13 months, clearly demonstrates this fact.

At a quick glance, yes, it's easy to see why the mistake is made. As you can see, for 11 out of the 13 months recorded in the graph, the yield of the 10-year Treasury Note and interest rates for 30-year fixed-rate mortgages did follow a somewhat similar long-term path, despite obvious short-term divergences. However, take a closer look at the drastic change that occurs from January through March 2008. What's interesting about this graph is that, during this period, the Federal Reserve had cut interest rates six times, from September 2007, to March 2008, and yet mortgage rates were actually higher in March 2008 than they were a year before. Not only does this demonstrate that the yield of the 10-year Treasury Note is not pegged to mortgage interest rates, it also reveals that mortgage interest rates are not set by the Fed either.

Stop being misled. If you or someone you know is thinking about buying or refinancing a home, give us a call. We'll give the facts you need to make a truly informed decision.

Mortgage Interest Rates*

Rates as of 04/21/2008:

	Conforming	APR	Payment per $1,000	Jumbo	APR	Payment per $1,000
30-Yr. fixed	5.875%	6.018%	$5.92	8.125%	8.291%	$7.42
15-Yr. fixed	5.625%	5.863%	$8.24	%	0.000%	$0.00
5-Yr. fixed ARM	6%	6.144%	$6.00	7.875%	8.038%	$7.25
3-Yr. fixed ARM	5.875%	6.018%	$5.92	%	0.000%	$0.00
5-Yr. Interest Only	6.125%	6.270%	$5.10	%	0.000%	$0.00
FHA	5.875%	6.018%	$5.92	%	0.000%	$0.00
CONV ARM ( Annual)	5.625%	5.766%	$5.76	%	0.000%	$0.00
Idaho Housing	6.03%	6.174%	$6.01	%	0.000%	$0.00
USDA Guarantee	6%	6.144%	$6.00	%	0.000%	$0.00

*Rates are subject to change due to market fluctuations and borrower's eligibility.

Archive

Fannie Mae Guideline Changes

Mortgage Bond Foecast For The Week

Interest Rates Make a Sudden Drop

Mortgage Interest Rate Myths