Posts Tagged ‘changes in the mortgage industry’

Recent Mortgage Rate Changes

February 13, 2018

Wow!  Our economic world has gone crazy in recent weeks.  The Dow Jones average has dropped about 7.9% since its high on January 26, less than 3 weeks ago.

Mortgage interest rates have been changing dramatically too.  Rates have increased a half point (0.5%) since January 2.  Back in mid-December, I quoted an interest rate to a first-time home buyer named John.  Today, in mid-February, I would likely have to charge him 0.625% more than what I quoted in December.

So, what is driving the rapid mortgage rate changes?  In short, Wall Street, economic factors, and government policy.

To understand the basics, first realize that the vast majority of conventional mortgages are sold by lenders to Fannie Mae and Freddie Mac.  Fannie and Freddie then package these mortgages into mortgage backed securities (MBS).  Money managers, pension funds, insurance companies, mutual funds, etc. buy the MBS to keep in their investment portfolios.  They buy and they sell them like other investments. 

That means that the same economic factors that influence stock and bond prices – economic productivity, unemployment, inflation, and government policy – all impact mortgage interest rates.  And MBS must compete with other investment vehicles such as stocks and bonds to attract investors.

Many experts consider the market for 10 Year Treasuries as a benchmark or comparison for MBS.  Both investments offer stable, predictable cash flows.  Since January 2, 2018, the 10 Year Treasury rate has increased almost 0.4%.  Looks like interest rates on these competing investment vehicles are rising at the same time.

Given recent positive unemployment figures and wage growth, inflation concerns are increasing.  Higher inflation expectations tend to drive higher interest rates on Treasuries, bonds, and MBS.  Let’s face it, if investors expect inflation to be 3%, they will want to earn more than 3% on their fixed-income investments, right.  So as inflation concerns rise, it is logical to expect mortgage interest rates to rise accordingly.

When it comes to mortgage interest rates, there’s much more to consider, and we will delve into more details in future posts.  For now, if you know someone in Georgia who is considering a home purchase, please have them contact me.  We at Dunwoody Mortgage offer competitive rates in this changing environment, along with outstanding service to get home buyers to closing on time.


Tools to Access Your Home’s Equity

January 11, 2018

Home owners often seek to use their home equity as a source of cash.  They can use this cash for renovations, paying off other high interest debt, funding college educations, etc.

Owners typically access their equity by either (1) paying off their current mortgage and obtaining a new, higher-balance mortgage using a “cash out” refinance or (2) obtaining a home equity line of credit (HELOC).  Each option has some pros and cons.  The new federal tax law somewhat changes the pro / con dynamic.

Under the 2017 tax law, mortgage interest paid on loan balances up to $750,000 remains deductible on your federal taxes.  However, the tax law eliminated the mortgage interest deduction on new home equity loans and lines of credit.  But note that this only affects home owners who itemize their taxes.  And with the doubling of the standard deduction under the new tax law, the number of households that itemize deductions is expected to drop from 34 million to 14 million.

So, if you are considering accessing your home equity, first think through whether this tax change will affect you.  If you are a single filer and your itemized deductions including mortgage interest would be less than $12,000, the interest deductibility will not affect your decision.  If you file jointly and your itemized deductions would be less than $24,000, interest deductibility will again not affect your decision.

Here is my list of benefits for each option:

Cash Out Refi:

·        You can obtain a fixed rate loan.  The monthly principal and interest payment will never change.  HELOC rates are variable and your payments will increase when market interest rates increase.

·        You can deduct all interest (on loan balances up to $750,000) as part of your federal tax calculations as described above.

·        You reduce your outstanding loan principal with every payment.  The monthly payments reduce your outstanding principal every month.  HELOC payments are interest only.  For people who don’t have the financial discipline to pay down HELOC balances, the cash out refi forces you to reduce the loan balance monthly.


·        You can access more of your home’s equity.  HELOC’s typically allow up to 85% loan balance (first mortgage plus HELOC) to home value or loan to value “LTV.”  Cash out refis only allow a maximum 80% LTV.

·        You pay less for the loan itself.  Closing costs are typically lower for a HELOC than for a mortgage.

·        You can pay less each month.  Required HELOC payments are interest only.  By not paying down part of the principal each month, your monthly payments will likely be lower with a HELOC versus a traditional  mortgage.   

Next post, we will cover some “rules of thumb” when choosing between a refi and a HELOC.  Own a home in Georgia and want to access some equity?  Give me a call at Dunwoody Mortgage and let’s review your options.  We can consider the advantages of each as we guide you to the best solution for your situation.

My (FHA Loan) Christmas Wish List

December 19, 2017

FHA loans are great for certain borrowers.  I look to FHA loans when my clients have credit scores of say 680 or less, little available cash for a down payment, and want a 30 year mortgage.  FHA loans also can help a home buyer who has a higher level of other outstanding debt, as FHA guidelines allow slightly higher debt to income ratios.

FHA loans typically offer lower interest rates than conventional loans, but they do have some limitations.  But now there is some movement in Washington to change some of these limitations.  Let’s pretend that the federal government is Santa Claus.  Here’s my FHA mortgage wish list:

  • Rep. Maxine Waters, D-Calif has introduced the Making FHA More Affordable Act.  This bill would repeal the “life of the loan requirement” for FHA mortgage insurance.  Right now, if a borrower closes an FHA loan with a less than 10% down payment, the mortgage insurance is permanent – it never goes away.  In contrast, the mortgage insurance is cancelled automatically on a conventional (non-FHA) mortgage when the outstanding principal balance reaches 78% of the home’s original value.  In my opinion, this would be a good change for consumers who need FHA financing.  I don’t think they should have to pay the mortgage insurance after they have 22% equity in their home.
  • Under Ben Carson, the federal Department of Housing and Urban Development (HUD) issued a report signaling an easing in FHA requirements for condominiums.  Currently, to close a FHA loan on a condo, the condo complex must be on the FHA approved list.  Condos apply for FHA approval based on a number of FHA-specified criteria.  If the complex is not on the FHA approved list, a buyer cannot obtain a FHA loan and must obtain conventional financing.  The National Association of Realtors reported that of the 614,000 condo sales in 2016, only 4% were closed with FHA financing. 
  • In addition to loosening FHA condo complex approval guidelines, the administration is also indicating that it wants to revive FHA’s “spot loan” program.  This program allows homebuyers to purchase a  condo in a complex that has not been approved for FHA financing.  Some estimates have claimed that without the spot loan program, 90% of condo projects cannot have buyers with FHA mortgages. 

We mortgage lenders must work within the rules defined by the regulators – we don’t make the decisions.  But I think the above changes would be very positive, as they would make home and condo ownership less expensive and more realistic for buyers who need the FHA loan program. 

If you know a potential home buyer in Georgia who wants to know if they are on Santa’s, sorry, FHA’s, “good list,” have them contact me at Dunwoody Mortgage.  We will work within FHA guidelines (and explore other potential loan options) to make sure they get the best deal on their mortgage, and hopefully enjoy some FHA guideline “gifts” from Washington soon.

Merry Christmas and Happy Holidays!!


Georgia’s TV and Film Industry is Booming. Forget Hollywood! Put Down Roots Right Here.

October 26, 2017

On your commute today, you probably passed a yellow TV or movie production sign – they are that common around Atlanta these days.

Look at the numbers:

  • FilmLA says Georgia is the #1 filming location in the world.
  • 320 film & TV productions will be shot here in 2017, generating $9.5 billion in direct spending.
  • The Motion Picture Association of America reports that more than 28,600 Georgians are directly employed by the film industry, while an additional 12,500 people work in production-related jobs.

The movie business may be kind to Georgia, but the mortgage industry traditionally hasn’t been kind to movie makers.

Film and TV studio workers may earn great livings, but they often have irregular employment schedules. Their employer of record can change with each project, and that’s a big red flag for mortgage underwriting. When it comes time to get financing for a home, regularly employed studio employees may be denied because they can’t demonstrate the stable income underwriters demand.

Until now.

I have access to a new loan program that can ease the way to home ownership for film & TV union members. The qualification requirements are simple.

Union members:

  • Who receive W-2s as salary employees
  • Who have two full years of filed tax returns in the film & TV industry

Underwriting will view the union as the employer, rather than the studio, and the union will be able to verify length of employment. The qualifying income will be based on the monthly average income. The borrower will still produce pay stubs to document current year earnings.

If you know someone in the film & TV industry who complains about renting or apartment life, please forward this email.  They may finally be able to put down roots in the new movie mecca.



Mortgage Rates and the Second Part of the Fed’s Announcement

June 23, 2017

The Federal Reserve’s announcement last week that it was increasing the Federal Funds rate included a second statement regarding the Fed’s bond holdings.  The Fed began buying Treasury and mortgage bonds after the Great Recession to lower long-term loan rates.  In the process, the Fed increased its debt holdings by over five times the previous balance – to over $4.5 trillion.

As part of last week’s announcement, the Fed said it will allow a small amount of bonds to mature without being replaced.  The Fed also said this amount will gradually rise as markets adjusted to the process.  Experts stated, “This process could put upward pressure on long-term borrowing rates.”

With the Fed out of the bond-buying business, the overall demand for Treasury bonds and mortgage backed securities will decrease.  A reduction in the demand for these investments should cause their prices to fall.  Remember that when values of mortgage backed securities fall, mortgage rates rise.


That is how the second component of last week’s Fed announcement can push mortgage rates higher.  Not by increasing the Federal Funds Rate, but by no longer buying bonds (and also possibly selling the bonds they already own). We could be entering an environment of lowering bond values and rising mortgage rates.

We can assume that Fed will be careful not to shock the markets too dramatically, so we don’t expect rates to dramatically increase. The goal of the Fed would be to complete the second part of their statement without pushing mortgages rates up.

That being said, mortgage rates are currently at their lowest levels of 2017.  Now is a great time to buy a home – from a mortgage perspective.  If you are looking to buy in Georgia and you want focused service with a keen attention to detail, call me at Dunwoody Mortgage Services.  We will do as much of the “heavy-lifting” as possible so your mortgage experience is as pleasant as possible.



How Could Fed Rate Increase Affect Mortgage Rates?

December 20, 2016

For the first time in a year, the United States Federal Reserve raised the federal funds rate by 0.25%.  How will that impact mortgage interest rates?

Here’s a history lesson:  The last time the FED raised the federal funds rate was in December 2015.  By the end of January 2016, mortgage interest rates actually improved by about a half point.  Mortgage rates then stayed flat (for the most part) until June and July, when they continued to improve.  Mortgage rates stayed at this very low level until election day.  From election day through December 15, 2016,  mortgage interest rates increased about 0.75%.

When trying to analyze mortgage interest rates, it makes sense to look at a mortgage loan as an investment.  Here’s why…Fannie Mae and Freddie Mac purchase most of the conforming mortgages originated in the USA.  They “pool” these mortgages into mortgage-backed securities (“MBS”) which are bought and sold on Wall Street just like other investments.  MBS provide investors with regular, predictable income (from the interest payments on the mortgages), so they are considered less “risky” than stocks and mutual funds.

But ultimately, MBS must compete with all other investments for investors’ dollars.  In the recent, post-election period, stock values have increased making equity investments more attractive.  To compete, lenders had to raise mortgage interest rates to provide a greater return and compete with the high-flying equities.



In addition, China has been selling large amounts of its US government debt holdings.  As China sells, that creates pressure to raise interest rates on US government debt.  Again, government debt competes with MBS for investor dollars.  As interest rates on government debt increase, mortgage rates may have to rise to remain attractive to investors.

So what is a home buyer to do?  If you plan to buy soon, you can relax knowing that, once you get a home under contract, your lender can lock your interest rate through your closing date.  This means that if market interest rates rise between the time you lock your rate until closing, you still pay the lower rate specified in your lock.  You are protected against rate increases.

In addition, Dunwoody Mortgage offers a free interest rate float down on some mortgage products.  This means that, if market mortgage rates drop after you lock your rate, we might be able to lower your rate before closing.  With the free float down, after you lock your rate, you are protected should interest rates increase, and you may still be allowed to benefit if market rates decrease.

Ultimately, we at Dunwoody Mortgage are working in the best interest of our borrowers.  If you are looking to buy a house anywhere in Georgia, and mortgage interest rate changes make you nervous, contact me.  We can set you up with a loan program that can help protect you against the ups and downs of mortgage interest rate changes.



Interest Rates Jump

November 15, 2016

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One thing that I did not expect from this election was the change in interest rates.  Mortgage interest rates on November 14 were a half a percentage point higher than they were on November 7.  Rates are still close to their historic lows, and still lower than rates back in the second half of 2015, but they definitely have taken a quick upward turn in the last week.  And there’s really no way to predict how far rates may rise.  For a better understanding of what drives mortgage interest rates, take a look at these prior posts: and

While I don’t have a crystal ball to forecast interest rates, I will simply apply a bit of common sense.  Interest rates have been very, very low for multiple years now.  There really isn’t much opportunity for rates to go lower.  So logically, if rates are going to move, they will likely go up.  If you are ready to buy a house, how do you protect yourself from a rate increase?  Answer:  You lock your rate.


When a home buyer goes under contract, I can lock rates for periods from 30 days up to 90 days.  The longer the rate lock period, the higher the price.  Locking your interest rate is the sure way to protect yourself against rate increases.  I locked a refinance on November 8, just before the close of business.  I hate to think that this client’s rate would now be 0.50% higher if we had delayed.  Because she locked for 45 days, her rate will not increase if we close the loan before the end of business on December 23.  As long as you can close before the lock expires, your rate will not change.  If something delays closing past the lock expiration, that might cost you.  (Moral of the story, quickly respond to any request from your loan officer.  Delays can cost you.)

Borrowers also want to know what happens if market rates decrease after they lock their interest rate.  Dunwoody Mortgage can also offer a free rate float down option on some loans.  If your qualifying rate drops by more than 0.25% and we can relock it (1) less than 30 days and (2) more than 7 days before closing, we may be able to do that at no charge.

So if you want to buy a home and you are worried about interest rate fluctuations, know that Dunwoody Mortgage can protect you regardless of which way the market moves.  Moving forward with a Georgia home purchase soon?  Call me here at Dunwoody Mortgage now, before rates go up any more.  We can answer your questions and offer the counsel to best protect you against interest rate changes.



Credit Reports and Qualifying for a Mortgage #2

October 12, 2016

The last post covered the credit score component of a credit report.  But remember, there is much more to a mortgage credit report than just the score.  After looking at a client’s credit score, I next review any public record filed against the client (let’s call him “Matt”) in a court of law.  These include liens, judgements, foreclosures, and bankruptcies.  How do these items affect Matt’s ability to win loan approval?

  • Liens – A tax lien is a big red flag. The IRS doesn’t play around when it comes to collecting money you owe them.  And lenders don’t want to get in line behind the IRS when it comes to collecting payments.  If Matt has a tax lien, he will likely need to pay it off before we can win loan approval.  We may be able to win loan approval if Matt has a tax lien, but it will take some extra work.
  • Bankruptcies – Bankruptcies stay on a credit report for 7 years.  Matt cannot obtain a conventional loan for 4 years following the bankruptcy discharge date (the date when Matt was officially released from personal liability for debts included in the bankruptcy).  For FHA loans, the waiting period is 2 years after the bankruptcy discharge date.  There are some differences in how we treat Chapter 13 vs. Chapter 7 or 11 bankruptcies.
  • Foreclosures – Foreclosures also stay on a credit report for 7 years.  It is possible to win loan approval even with a foreclosure.  For conventional loans, a 7 year waiting period is required.  For FHA loans a 3 year waiting period is required.  And note that the clock starts when the foreclosing bank sells the old house to someone else.  Not when the bank first takes the house.
Gavel with money background

Gavel with money background

  • Short Sales – Once again, short sales stay on the report for 7 years. A short sale occurs when a loan servicer agrees to the sale of a property by the borrower to a third-party for less than the outstanding mortgage balance.  Waiting periods are 4 years for a conventional loans and 2 years for FHA loans.
  • Legal Judgments – Outstanding legal judgements must be paid off prior to or at closing.  Note that we can include payment of Matt’s legal judgments as part of the closing itself.

There is much more to a credit report than just the score.  When a lender pulls your report and quickly says “you qualify,” he or she might be doing you a disservice.  You want a lender who will take some time to look closely at your report, and deal with any potential issues up front.  If you plan to buy a home in Georgia and expect your lender to invest time in the details, call Dunwoody Mortgage Services.  We will help you avoid surprises.





Credit Reports and Qualifying for a Mortgage #1

October 5, 2016

Portrait of Rodney Shaffer

This news may shock you – mortgage underwriters actually look at a borrower’s credit report.  Notice I said, credit report, not credit score.  The score is only one component of the full report.

When we pull a credit report, the first thing we do review is the credit score.  If the score doesn’t qualify, there’s no need to spend time on the report details.  My lending guidelines state that minimum qualifying credit scores for my clients are:

  • 620 for FHA and VA loans.
  • 620 for conventional loans.

Mortgage credit scores are different from consumer credit scores people get from websites like credit karma.  Issues pertaining to past mortgages carry more weight on a mortgage score than a consumer score.  So your mortgage score may differ significantly from a consumer score given to you by a credit card company or a website.  I’ve had clients with mortgage scores higher than their consumer scores and other clients with scores less than their consumer scores.  You never know for sure until you actually pull the mortgage report.


We look at scores from all three credit bureaus – Equifax, Experion, and Transunion.  We are required to use the borrower’s middle score for loan qualification.  And if there are multiple borrowers, then the lowest middle score is the score we use to qualify the application.  When I pull a report, if the score is less than 620, the client and I will discuss ways that they can improve their score, which may be simply waiting for their score to rise while they pay their bills on time, or contacting a credit counselor who might be able to help improve their score.

Regardless of how good the score is, I will look carefully at additional report details.  Sometimes these details can cause some underwriting questions or challenges, even if the score qualifies.  It’s usuaully best to deal with any credit questions proactively.

Home buyers deserve to know as early as possible whether they can realistically win loan approval.  There’s no need for them to waste their time or a Realtor’s time searching for a home when they cannot qualify for a mortgage.

We will review other key credit report details in future blog posts.  But for now, if you know someone looking to buy a home in Georgia, and this person may have a few “skeletons” in their “credit closet,” (hey Halloween is approaching!), refer them to me.  I’ll take the time to look at all the details, giving them the level of service they truly deserve.







Declining Asset Loan Option

May 16, 2016

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In the last post, I commented on a situation where a retiree with over half a million dollars in a brokerage account could not count his $4,000 monthly withdrawals from that account as “income” for a mortgage qualification.

So here’s what he can do with his current assets….I represent an investor who will do a “declining asset” loan for this retiree.  (Not all lenders will do this type of loan.)  We start with his account balance and multiply by 70%.  This is to adjust the balance for potential stock and bond market fluctuations.  That gets him to $350,000.

Then to fit this amount into a 10 year monthly income forecast – I divide by 120 months.  That yields about $2,915 per month in available income.  And that is all the “income” I can use based on his assets.

Retirement Income

This retiree told me that he had been “prequalified” by another lender for the full $4,000 “income” that he withdraws every month.  I asked, “Did that lender ask you any questions about HOW you earn your income?”  His response was, “No.”

We at Dunwoody Mortgage are trained to ask important questions up front.  By digging in just a little bit, we might discover potential underwriting road blocks early in the process.  Then we can either determine a way to work through the road blocks or stop the process early, before the buyer and the Realtor waste a lot of time and the buyer’s money (for home inspections, appraisals, etc.) on starting the home purchase process when they cannot win underwriting approval.  His Realtor was very appreciative that I helped him avoid wasting a lot of time searching for houses that this retiree could not afford.

If you know a retiree who is thinking about buying a home in Georgia, tell them to carefully consider how their assets are allocated and how they receive their income.  Not all assets and income are treated equally.  Have them call or email me at Dunwoody Mortgage Service.  We will discuss their options and we can even help them coordinate with their financial planner if necessary.  I can help them structure the deal right the first time – without wasting their time on homes that they cannot buy using their current asset accounts.