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August 22nd, 2010
 A recent Fair Isaac Company news release shows that U.S. credit scores have dropped since 2008 in synch with the economy.
High unemployment, a sinking economy and a Housing Crisis, take your pick as to why credit scores are dropping.
Consumers have defaulted on mortgages in record numbers and mortgage late payments carry a lot of weight on credit scores. They’ve done the same on credit cards, although recent statistics indicate that problem is slowing.
So, is anyone really surprised by the Fair Isaac news release that credit scores are dropping?
The chart below is right from Fair Isaac:
Notice that the percentage of consumers in almost every FICO score range in the above chart has worsened since 2008. Not by a lot, but they are worsening.
Keep in mind, that most mortgage lenders won’t accept middle FICO scores below 620. So, the increase in FICO scores below 600 is not good news.
There are a two interesting trends on the chart:
- the percentage of FICO scores between 750-799 have actually increased in 2010 after dropping in 2009. While this may seem like good news at first, that increase probably came from those dropping from the higher tier, which is a negative.
- the other interesting development is the percentage of FICO scores in the tier from 300-499. It increased in 2009, but saw a pretty substantial decrease in 2010. So, the number of people with the worst credit is dropping, which is good news. You would think it actually be getting worse in our economic recession. But look closer and you’ll see that the tier has always had the smallest percentage of consumers. It actually takes a lot of negative reporting to get a FICO score under 500. This is probably more a sign that the number of consumers now using cash instead of credit is increasing. I’d also like to see Fair Isaac’s numbers/percentages on those that don’t have enough credit to generate a FICO score. I’d bet they’re going up.
Again, keep in mind when looking at this chart that consumers are shifting from one tier to the next. So, the 650-699 tier staying relatively stable, probably doesn’t mean much. There are probably as many consumers dropping into it as there are dropping out of it.
The good news to take away from all this is best represented with the bar graph below:
If you add up the percentages you’ll find that in 2010, even after all the recent economic hardships, over 53% of American consumers have a FICO score above 700.
FICO Scores & Mortgage Rates
Fair Isaac didn’t cover this in their news release, but since this is a mortgage blog, we’ll cover it.
In 2008 FNMA/FHLMC started charging more to mortgage borrowers with FICO scores under 720. They use what’s called, Loan Level Price Adjustments (or LLPA) to determine how much more to charge.
You can reference the previous link for all the detailed charges, but here’s the basic matrix:
*NOTE – the above price adjustments are in discount points, not interest rate points.
As you can see from the chart, if your middle FICO score is under 720 you’re going to pay more to get the going mortgage rate (unless you borrow less than 60% of a property’s value).
I’d like to see Fair Isaac break their tiers down to correspond with FNMA’s matrix above. That would give us better data to see how the trend in FICO scores is affecting borrower costs.
What we can glean from their existing data is that in 2008 45.7% of consumers had a FICO score below 700. In 2010 that number increased to 46.9%.
That means that an additional 1.2% of consumers paid either a higher interest rate or had higher closing costs in 2010 because of their FICO scores.
Do you think that’s going to get worse of better in 2011?
Michigan, Mortgage, Expert, Birmingham, Bloomfield, Detroit, Rochester, Royal Oak, Troy
_______________________________________________________________
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I invite you to connect with me on the social networks below & subscribe to my blog!
   
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_______________________________________________________________
Drew Sygit: CMPS, CMC, CRMS, CMLO, CALO, MBA, NAMB/MAMP Instructor & Speaker
The most Certified Mortgage Expert in the Midwest
Contact him for The Lending Edge
P: 248-356-3739 • F: 866-215-3755 • dsygit@TheLendingEdge.com • www.TheLendingEdge.com
Tags: Birmingham, Bloomfield, Credit, Detroit, Expert, fico, Michigan, Mortgage, Rate, Rochester, Royal Oak, Troy
Posted in Credit, FICO Scores, Rates | No Comments »
August 11th, 2010
 With the world’s largest bond fund PIMCO stating there’s a 25% chance of deflation, the Federal Reserve announces new measures to spur the U.S. economy.
The Federal Reserve met yesterday and the markets held their collective breath to see what actions the Fed would take.
Citing continued concerns about the economy, the Fed left rates where they were as expected.
All the signs and statements point to the Fed being more & more concerned about deflation and the resulting contraction of the economy. The Federal Reserve Press Release published after the meeting pointed out:
Bank lending has continued to contract.
and:
To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve’s holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities.1 The Committee will continue to roll over the Federal Reserve’s holdings of Treasury securities as they mature.
That last part is very good news for the housing industry.
The Fed reinvesting into more bonds means they’ll still be effectively subsidizing interest rates.
Don’t celebrate too soon though. The Fed also remarked:
Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit.
These factors are all working against many potential buyers taking the plunge into home ownership along with the contracted lending policies of the banking system.
Deflation will also work against the housing market. You’ve probably already witnessed a deflationary mindset and didn’t recognize it. Many potential home buyers have waited to buy a home believing that prices will continue to fall. Think about a significant portion of consumers taking that attitude with cars, electronics, etc. The whole economy goes into a tailspin that’s not easy to get out of.
When can we expect to see a sustained recovery in the housing market?
Look to the employment numbers.
I don’t mean the unemployment numbers! Those are now skewed by the numbers of people that have given up on looking for a job.
When people start going back to work and getting raises, they’ll start buying houses.
In the mean time, those that can afford to buy will realize the best deals.
Michigan, Mortgage, Expert, Birmingham, Bloomfield, Detroit, Rochester, Royal Oak, Troy
_______________________________________________________________
If you enjoyed my blog post,
I invite you to connect with me on the social networks below & subscribe to my blog!
“Referrals are Sending Someone You Care about, to Someone You Trust!”
So, forward this blog post to someone that’ll appreciate it!
_______________________________________________________________
Drew Sygit: CMPS, CMC, CRMS, CMLO, CALO, MBA, NAMB/MAMP Instructor & Speaker
The most Certified Mortgage Expert in the Midwest
Contact him for The Lending Edge
P: 248-356-3739 • F: 866-215-3755 • dsygit@TheLendingEdge.com • www.TheLendingEdge.com
Tags: Birmingham, Bloomfield, Detroit, Expert, Federal Reserve, Interest Rates, Michigan, Mortgage, Rochester, Royal Oak, Troy
Posted in First Time Buyer, Government, Housing, Mortgage Backed Securities, Rates, Real Estate Sales, Recovery | No Comments »
July 13th, 2010
What are Michigan homeowners and homebuyers waiting for?
Check out this chart, compliments of my friendly neighborhood First American Title rep, Julia Halpin:)
Gadzooks & zounds! These historically low mortgage rates are record setters.
What more could a Michigan homeowner looking to refinance or a Michigan homebuyer looking to buy ask for?
How about appraisals coming in higher & a job to qualify to buy!
These historically low mortgage rates are a sign that our economy is not doing all that well:(
But, if your home can appraise or you do have a job, it’s a fantastic time to get a mortgage!
So, give our team a call.
MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY
_______________________________________________________________
If you enjoyed my blog post,
I invite you to connect with me on the social networks below & subscribe to my blog!
“Referrals are Sending Someone You Care about, to Someone You Trust!”
So, forward this blog post to someone that’ll appreciate it!
_______________________________________________________________
Drew Sygit: CMPS, CMC, CRMS, CMLO, CALO, MBA, NAMB/MAMP Instructor & Speaker
The most Certified Mortgage Expert in the Midwest
Contact him for The Lending Edge
P: 248-356-3739 • F: 866-215-3755 • dsygit@TheLendingEdge.com • www.TheLendingEdge.com
Posted in Affordability, Purchase, Rates, Recovery, Refinance | No Comments »
June 12th, 2010
Have you been watching mortgage rates over the last few weeks in Michigan?
They’ve touched on record lows. Take a look at this graph of Mortgage Backed Security prices – where higher prices mean lower rates:
The chart above shows the market over the last 2 years. Michigan Mortgage Rates for borrowers have pretty much hit record lows again, subject to daily fluctuations.
So where are all the homebuyers?
Mortgage applications have dropped for three straight weeks and housing sales have turned down a bit.
Michigan Homebuyers may have been spoiled by the Homebuyer Tax Credit, but might want to get past it.
Figure out a monthly payment you can comfortably afford, as now is not the time to stretch your budget.
Then go out a find a house! With record low mortgage rates and the drop in housing prices, you may never find a time homes are more affordable than today!
So, what’s your excuse now?
_______________________________________________________________
If you enjoyed my blog post,
I invite you to connect with me on the social networks below & subscribe to my blog!
“Referrals are Sending Someone You Care about, to Someone You Trust!”
So, forward this blog post to someone that’ll appreciate it!
_______________________________________________________________
Drew Sygit: CMPS, CMC, CRMS, CMLO, CALO, MBA, NAMB/MAMP Instructor & Speaker
The most Certified Mortgage Expert in the Midwest
Contact him for The Lending Edge
P: 248-356-3739 • F: 866-215-3755 • dsygit@TheLendingEdge.com • www.TheLendingEdge.com
Tags: Birmingham, Bloomfield, Detroit, Expert, Michigan, Mortgage, Rochester, Royal Oak, Troy
Posted in First Time Buyer, Housing Tax Credit, Michigan, Mortgage, Purchase, Rates | No Comments »
May 31st, 2010
Should Borrowers care also?
A recent article I read online at a real estate blogging site called ActiveRain, brought out some interesting comments.
I was shocked after reading all the comments that most of the agents commenting seemed to endorse buyers shopping for a mortgage solely by price.
A couple of brave Loan Originators pointed out that LO’s could do the same thing to agents and recommend buyers & sellers shop solely for the agent willing to work for the lowest commission.
I don’t really see the tit-for-tat thing being constructive for either side.
Here’s the comment I posted:
I find it interesting that not one Realtor mentioned the experience and knowledge of a loan officer over price!
Hmmm, it seems the collective thoughts, of some of the best agents in the industry, are of the opinion that price is all that matters.
I can’t put into words how disappointed I am if this is truly the thought process of the brightest Realtor minds in this business.
The next time any of you want to complain about one of your deals not going smoothly or blowing up due to lender issues, just remember – the buyer shopped and got the best price, so everyone involved got what they deserved.
Not a very constructive comment either. I apologize as I was a bit steamed that the other half of our industry’s symbiotic relationship appears to think they could easily survive without experienced or knowledgeable LO’s.
That is the key to this debate. We’re all in this together. Each half needs the other to get paid.
I fully believe buyers should be shopping for the best deal. Rates & fees are only a small part of what makes up the best deal. The best rate & fees mean nothing if the deal doesn’t close due to incompetency.
So, do unto others as you would have them do unto you.
BTW – here’s a few of the responses by real estate agents to my post. Borrowers should note that they all endorse experience over lowest price:
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Great post. There’s so much more than “the price.” Understandable that some of the comments were upsetting when you’re trying to do what’s best for the buyers. You are correct… we need each other!
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MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY
_______________________________________________________________
If you enjoyed my blog post,
I invite you to connect with me on the social networks below & subscribe to my blog!
“Referrals are Sending Someone You Care about, to Someone You Trust!”
So, forward this blog post to someone that’ll appreciate it!
_______________________________________________________________
Drew Sygit: CMPS, CMC, CRMS, CMLO, CALO, MBA, NAMB/MAMP Instructor & Speaker
The most Certified Mortgage Expert in the Midwest
Contact him for The Lending Edge
P: 248-356-3739 • F: 866-215-3755 • dsygit@TheLendingEdge.com • www.TheLendingEdge.com
Tags: Birmingham, Bloomfield, Detroit, Expert, Michigan, Mortgage, Rochester, Royal Oak, Troy
Posted in 1-TLE, Expert, First Time Buyer, Mortgage, Purchase, Rates, Refinance | No Comments »
January 10th, 2010
Well 2009 is in the books as a very challenging year for most.
Michigan Real Estate did not have a good year, unless you were selling foreclosures. Some of the 2009 negatives:
- Record foreclosures
- Falling property values
- Almost 50% of mortgaged properties have more owed on them than they’re worth.
- Loan modifications not getting done despite a new Michigan law (as of July 6) that more or less requires lenders to offer face-to-face modification meetings.
- City assessors not dropping taxable values in synch with the real estate market.
Most of those negatives will continue to haunt Michigan Real Estate in the new decade. There are some positive headwinds though:
- Mortgage rates are still low.
- The Homebuyer Tax Credit was extended and expanded to repeat buyers. (it expires at the end of April though)
- Property sales are recovering due to the above rate & tax credit environment, also due to the affordability of real estate.
- Job losses are finally slowing.
- New guidelines from the state of Michigan should lead to fairer property assessments this year.
- Taxpayers are getting fed up enough to take action with all the Wall Street bailouts that don’t seem to make it to Main Street.
What’s in store for the mortgage market in 2010?
- A new Good Faith Estimate went into effect January 1. Once everyone is used to it, it will actually make it easier for a borrower to understand. It’ll also be tougher for corrupt/incompetent lenders to bait-and-switch borrowers.
- Expect more delays in closing a mortgage as new rules also require any changes in fees or rates to be re-disclosed to a borrower at least 3 days prior to closing. Great news that are competition now has to do what we’ve always done!
- All mortgage originators have to be nationally registered by the end of July to weed out the undesirables.
- Expect appraisal issues to continue as FHA implements changes to put “firewall protection” between appraisers and loan originators.
- FHA also wants to implement pricing/rate adjustments tied to credit scores. This keeps getting pushed back, but it could happen this year.
- The Federal Reserve is scheduled to discontinue the purchase of Mortgage Backed Securities at the end of March. This could be significant as rates were at 6% before they started buying.
Overall I personally think that 2010 will be a turning or tipping point for Michigan Real Estate and the economy in general. The public is past the shock stage and has come to terms with our new realities. That doesn’t mean we’re all happy with the developments, but we’re not surprised by them anymore.
I hope that more taxpayers watch, understand and start to do something about the corruption and nepotism between Wall Street and Washington D.C.. The banking industry that pretty much caused this Great Recession we’re in through their greed, is buying votes in Congress to thwart any real policy changes to clip their wings. Making it more likely that this will happen again – although probably worse.
We’ve also got several changes going on at The Lending Edge Team for 2010:
- We’re now part of First Michigan Bank, a small community bank in Troy with a very competent support staff.
- We’ve switched our blog from Blogger to WordPress for more versatility.
- We’ve got a new website (www.TheLendingEdge.com), please check that out. It’s not totally done as we’ll be adding more & better content.
- We’ve also switched to a new, more robust database. Please be patient with us though as we’re still learning to use it, removing duplicate records and re-categorizing our contacts.
- We’ll also be launching a new e-newsletter once we get the database situated.
- Drew Sygit will be doing more webinars and speaking engagements in 2010. He was also recently voted onto the Board of Directors of the Financial Planners Association of Michigan (the only mortgage lender on the Board).
Despite all the challenges of 2009, remember to be positive and always look to the future. Positive energy attracts positive people & events!
Posted in 1-TLE, Appraisals, FHA, First Time Buyer, Foreclosure, Housing, Housing Tax Credit, Housing Values, Loan Modifications, Michigan, Mortgage, Property Tax, Rates, Real Estate Sales, Recovery, Upside Down | 13 Comments »
November 21st, 2009
MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY
I recently came across an interesting chart I thought I’d share, that shows mortgage rates often trend lower at the end of the year.
The data above was culled from FHLMC’s data that is published weekly. Please note, that this data also tracks the average points charged (0.7 points in the graph).
I’ve had many calls from rate shoppers so intent on finding the lowest rate, that they foolishly don’t take the time to understand the whole picture, nor listen to an expert (myself) trying to explain it. You can cure ignorance, but not stupidity.
Now, before you go planning on waiting to refinance until December 31st to get the lowest possible rate, remember that the past is not a reliable predictor of the future. Just look at our recent economic mess for proof of that – so called Wall Street experts based a lot of their actions on past market movements and look how that worked out.
Here’s a chart of Mortgage Backed Securities over the last 6 months:
In this graph, green is good and since this chart tracks PRICES, not rates, higher means lower rates.
As you can see, rates have been heading in a favorable direction since mid-October. They did though, have a slide at the end of September and were flat at the beginning of October.
The more technical of you will notice that prices have moved above their 25, 50, 100 & 200 day moving averages – typically a sign of a strong rally.
How long will rates stay low? Not much longer. The Federal Reserve is artificially holding rates low by buying Treasuries and Mortgage Backed Securities. They’ve announced their intentions to end these purchases by the end of March.
Look at the chart above. Rates started their dramatic improvement last fall when the Fed started their buying binge. Mortgage rates have improved by over 1% since then.
It’s not a stretch to anticipate they will increase by 1% when the Fed stops buying.
So, if you or anyone you know has a rate above 5.5%, give strong consideration to looking into refinancing now.
Just don’t make the mistake of waiting for the market to get where you want it and THEN applying for a mortgage. Chances are, it’ll take a day or two to get all the paperwork sorted so you can lock an interest in – and by then the rate could be gone.
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In addition to real estate lending, consulting and investing, Drew Sygit writes & speaks about the mortgage & real estate industries. He holds mortgage industry designations CMPS, CMC, CRMS, CMLO, CALO, has an MBA and is an approved industry instructor. He’s presented, spoken and/or written for HUD, Financial Planning Association, Financial Planners Association of Michigan, Michigan Association of CPA’s, Institute of Continuing Legal Education, Oakland Real Estate Investors Association, North Oakland County Board of Realtors and numerous industry publications. For speaking engagements and questions he can be reached at dsygit@TheLendingEdge.com.
Tags: interest rate, Refinance
Posted in 1-TLE, Expert, Mortgage Backed Securities, Rates, Refinance | 3 Comments »
June 7th, 2009
Mortgage rates spike almost 1% in just over two weeks, what’s going on?
June 6, 2009 — DETROIT, MI – One of the government’s stated goals this year is to stabilize the housing market. The thinking is that a long as home values continue to fall, homeowners will lack confidence in the economy and in response, won’t spend money.
To stop home values from falling, the number of foreclosures must be curtailed. One of the ways the government has been trying to curtail foreclosures is by keeping mortgage rates low. Low rates allows homeowners to refinance and lower their payments, so they don’t let their homes go to foreclosure and makes buying homes more affordable, so it increases homes sales to absorb the homes that have been foreclosed on. Read the rest of this entry »
Posted in 1-TLE, Government, Mortgage, Rates, Refinance | 5 Comments »
May 28th, 2009
Another bubble may have burst, this time with low mortgage rates.
DETROIT, MI – It’s an unsettling feeling watching a market in free-fall. You watch it drop, drop and drop some more, wondering and hoping that it’ll level off. When it doesn’t, panic and paranoia creep in and your stomach starts to tighten.
I’m sure a lot of bond traders on Wall Street were going through this as one of the WORST days for Mortgaged Backed Securities played out. Take a look at the chart below:
 (NOTE: this chart reflects MBS prices which are the inverse of interest rates.)
As if to set the market up like a pool hustler, the day started with a bit of improvement after a bad day yesterday. Then the market kept dropping and dropping and dropping, etc.
What’s this mean for interest rates?
Well, you’re looking at rates being ½% worse than they were at the start of last week, maybe even higher.
What caused the sell off?
It was an accumulation of factors plus mob hysteria thrown in for good measure. The government’s auctioning off a slew of Treasuries this week, consumer confidence shot up last month and was reported yesterday, housing sales are up and the market was just nervous that all this will lead to inflation.
The question is, is this a reset of the markets or will the next round of bad news drive rates back down? We also have the Fed to watch and see how team Bernanke will react to this. The Fed pledged 1.25 trillion dollars to buy MBS and keep mortgage rates around 5%. They’ve only used up about half of this amount. Will they go “all in” and blow the rest on a gamble to call Wall Street’s bluff?
Stay tuned.
Posted in 1-TLE, Expert, Mortgage, Rates, Refinance | No Comments »
March 19th, 2009
How low will they go, but more importantly – for how long?
March 19, 2009 — BLOOMFIELD, MI – The Federal Reserve met yesterday and shocked the markets with their announcement of aggressively buying government debt to kickstart the economy.
Oh, by the way, they also announced they were leaving the Fed Fund Rate at the previous target amount of 0-0.25% as expected.
The real news was obviously the buying of debt. The markets reacted with Treasury & Mortgage Backed Security (MBS) prices soaring, pushing yields and rates down to their lowest levels since January 8, 2009.
Note: the chart above shows MBS prices which are the opposite of interest rates. So the higher the better, green is good news!
The challenge for many homeowners looking to take advantage of this rally and refinance is – timing. I’ve been advising my clients and warning prospects to get their mortgage applications in ASAP. We can float the interest rate while getting the loan approved by underwriting. Several of my clients took my advice and we’ll be looking to lock their loans today and close quickly.
Those that didn’t take my advice will be facing an uphill battle of trying to get their documents to us, so we can generate an application, which they then have to sign & get back to us with an application fee, so we can then lock their interest rate in. Not only that, underwriting turn times are terribly long currently and many 30 day locks may be blown. We’ll be looking to do 60 day locks for new clients because of this, but that means an 1/8% higher interest rate.
If you’re reading this and thinking of refinancing, please understand that just like the economy is going through challenges we’ve never seen, the same is true in the mortgage industry. It’s not business as usual! Those that have gone through a refinance in the past need to understand it’s much more difficult in today’s environment.
There are fewer choices for funding sources & products, pricing rarely allows “no cost” refinances, application to close cycles are much longer and underwriters are asking for a whole lot more documentation. Are we still doing loans? Yes, both purchases and refinances. In many ways, we’re back to the way things were done in the mid 1990’s.
Federal Reserve Buying Binge
So, what caused rates to plunge?
Well, the Fed announced that they’d be buying $300 billion in Treasuries, an additional $750 billion in MBS (on top the $500 billion pledged in December) and $200 billion in FNMA & FHLMC debt.
That’s 1.25 trillion dollars in debt!
How can the Fed do this? Remember the Federal Reserve is not part of the government, but can print money. They’ll be printing tons of money to fund all this! Taking this amount of Treasuries & MBS out of the market will affect the supply and demand dynamics of the market, which is why prices for both jumped yesterday (lowering rates).
Inflation is the major concern though. All this borrowing will eventually lead to higher interest rates once the economy recovers. I hope the Federal Reserve stays on top of this.
Please give us a call or email us if you have any questions on any of this or have a referral for us.
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Drew Sygit is President of The Lending Edge and holds mortgage industry designations CMPS, CMC, CRMS, CMLO, CALO, has an MBA and is an approved industry instructor. He’s spoken for HUD, has written numerous articles and is a mortgage industry advocate for loan originator licensing and consumer education. He can be reached at 248-356-3739, dsygit@TheLendingEdge.com or read his blog: http://drewsmortgagenews.blogspot.com/.
Posted in 1-TLE, Expert, Government, Mortgage, Rates, Recovery, Refinance | 1 Comment »
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