Another Mortgage Meltdown? Not What You Think. 
I just read an article on CNBC.com from Monday titled, "Long-feared Mortgage Meltdown is Here." You can guess that I was a little concerned and surprised, especially since there are so many new regulations and many more coming. How could there be another Meltdown? The author was not talking about a meltdown as we might think. He was talking about the drop in mortgage applications and losses that the major banks are facing.

JPMorgan Chase said they expect to post a net operating loss for the lst half of the year. Wells Fargo has reduced it's workforce by 4,800 this quarter, mostly from the mortgage division. Cardinal Financial, McLean Va., said that it's 3rd quarter originations declined by 40% from it's 2nd quarter production. Those are certainly some scary figures, but there is some good news too.

The good news is that the Meltdown isn't in the form of bad, or toxic (the buzzword used during the mortgage market crash)loans, but in the form of financial losses to the big banks due to a reduction in mortgage applications. That is certainly bad news for shareholders of the major players. The bad news for the consumer is that these losses are being created by the increase in mortgage rates.

Some think the economy was being driven, albeit somewhat slowly, by the houseing sector. If the FOMC agrees, might we see a significant drop in rates?

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100% Financing with USDA 
USDA, the United States Department of Agriculture, has a wonderful loan product which allows 100% financing on primary home purchase transactions. There are some pros and cons, as you might have guessed.

The Pros are many, so here are a few. 100% financing is permitted. Closing costs can be included in the loan amount if the property appraises above the sales price. Gift funds are allowed to pay for closing costs. Seller contributions are allowed to pay closing costs. The Guarantee Fee can be financed in the loan amount. The monthly Mortgage Insurance is much less than FHA, only 0.40% annually. Typically you only need a 620 credit score.

There are fewer Cons, but here are the 3 biggest. There is an income limitation/ceiling, based on the property's county. The property must be in an eligible area. A borrower is ineligible if they have enough cash to qualify for a 20% down payment conventional loan.

Most of our Lenders are quoting a 30 year fixed rate of 4.0%, or better, with no points, so the rate is great. If you or someone you know is thinking of purchasing a primary home, please call me to discuss the possibilty of putting this amazing loan program to work for you.

Brett Wolf

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Mortgage Rates are Dropping Again. 
One of our Lenders is quoting some awesome rates today! They are offering an FHA 30 year fixed rate at 3.875% and no points! I know the cost of the upfront MIP (Mortgage Insurance Premium) went up to 1.75% and the monthly MI increased to 1.35%, but if you need a low down payment loan, this is the way to go.

The same Lender is quoting a Conventional (Fannie Mae or Freddie Mac) loan rate of 4.375% and no points for a 30 year fixed rate mortgage. This is available for loans with a downpayment of as little as 5% (sometimes 3%) and can be used for any property type.

Unless you are going to closing and must lock, I feel that is safe to float your rate. There will be some volatility so don't put your blinders on, but overall the risk should be outwieghed by the reward. Let it ride!

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The Federal Debt Ceiling. Does it Matter? 
The Federal Debt Ceiling is the amount that the Federal Government is allowed to borrow and that amount is determined by Congress. The Treasury Department has said it will hit the existing ceiling on October 15th, but the fiscal year ends September 30th, so a preliminary budget must be agreed to by then. There is a lot of posturing on both sides of the political aisle, but ultimately the Republicans will negotiate in an effort to get something from the Democrats in exchange for agreeing to increase the ceiling. If no agreement is reached, the Federal Government will shutdown.

I don't think this will happen. It shouldn't, because they should remember what happened in 2011. The Federal Governement's debt rating was donwgraded in an historical event. Hank Smith, chief investment officer at Haverford, agrees, saying "There's no question they're going to raise the cebt ceiling."

The downgrade caused mortgage rates to bump up slightly, but then mortgage market participants quickly realized that the rating placed on US debt didn't really matter, since the US was still the safest place to invest because the US has never defaulted on any obligation in it's history. I really don't expect it to start happening now.

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Mortgage Rates Down for the Week 
After Wednesday's blockbuster news, mortgage rates dropped across the board. Yesterday and today were relatively quiet in the mortgage market as investors tried to determine what to do next. Most were waiting and watching, trying to get a leg up on their counterparts by finding a nugget of information that would enable them to predict what the FOMC will do next.

30 Year fixed rates for most lenders ended the week at 4.5%, typically with no points, while 15 year fixed rates were at 3.5%, also typically with no points.

Unless you are going to closing and must lock, I feel that is relatively safe to float your rate. There will be some volatility with mortgage rates, but overall the risk should be outwieghed by the reward. Let it ride!

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