The panic selling on Wall Street continued today. The DOW closed down over 300 points today, and more carnage is forecast for tomorrow. The bright spot, if indeed there is one, is that mortgage rates are taking part in the carnage and are falling to record lows for the 30 year fixed rate mortgage.
As has been mentioned numerous times in this column, rates are not consistent in every state. Oregonians enjoy slightly lower rates than California or Washington, neighbors to the South and North. However prevailing rates are always close. Today, as Wall Street experienced yet another round of panic sell off, mortgage rates followed with the 30 year fixed rate mortgage hitting new almost record lows. In Oregon, for those who qualify for the best rates out there, the 30 year fixed dropped below 4.5% as the 10 year Treasury bond yield dropped yet again.
In Oregon, for the borrowers who qualify for the best rates, there are many good loan programs still available, which include:
- Up to 95% conventional loan financing. Be aware that these loans will have to qualify for mortgage insurance, so will be available to only the strongest borrowers, and that these borrowers will not qualify for the best rates being advertised due to the high loan to value (LTV) ratios.
- Up to 85% financing for FHA loans. Borrowers with credit scores of 680 and higher will qualify for the best rates advertised (which are running neck in neck with the best rates for conforming loans), but again will have to add FHA mortgage insurance into the payment amount. These rates are available for purchases and rate and term refinance transactions only. NO cash out permitted.
- Refinance mortgages are available for borrowers with homes just 1 day off the MLS listings. Again, this is a rate and term refi only – no cash out permitted, and rates are higher for these loans.
- 100% financing available for USDA rural financing. Up to 90% of Oregon falls into the rural financing eligibility map, so be sure to check to see if your property qualifies for this type of loan. There are other rules as well, that must be followed, such as income limitations. All this information is available on the USDA rural website.
- MAPP is still available from selected lenders. MAPP (Mortgage Assurance Protection) is an insurance program that is often provided at no charge to the borrower and will pay up to 6 months payments if you should lose your job after you purchase a home. Please check with your lender for the specific guidelines that apply to your loan, as terms can vary depending on the insurer.
For those of you who have purchased a home with the intention of cashing in on the home buyer tax credit, this is a reminder that you are running out of time to get those loans closed. Some lenders are already warning that if they do not already have complete loan applications on file, they will not promise to get your loan closed by the June 30 deadline. If this applies to you, get that paperwork into your lender yesterday so you don’t lose out on the tax credit. The deadline has not been extended this time, and it is very unlikely that it will be.
The Senate appears to be making some headway on Financial Reforms. So far, it appears that many Senators, including Oregon’s Senator Merkley are listening a bit too much to the ever powerful bank lobbyists. He, in conjunction with Senator Klobuchar of Minnesota,, just pushed through “Restoring American Financial Stability Act of 2010,” which will limit all compensation, either direct or indirect, to mortgage brokers and independent loan officers. This may sound like a good idea, on the surface, but it is a bad bill that was rammed through without any input from the public and without adequate review from most of the Senators.
This bill, of course, refers to YSP (yieldspread) which already all goes to the borrower based on laws that went into effect in January 2010. The cap though could really hurt consumers seeking smaller loans, and of course places ZERO limit on the lesser known SRP that banks collect on the backs of consumers.
Way to go Senator Merkley. The independents were mostly honest. Yes, there were some greedy and fraudulent “bad eggs” in the mix, but the honest ones were keeping the banks honest too. They were providing much needed competition to keep rates lower and competitive. When competition disappears, the more greedy banks get more free reign to set rates and fees. This is definitely not good for consumers.
For more information about how banks make their money on mortgages you might like to read:
YSP versus SRP – facts versus fiction – what is SRP?
Panic reigns on Wall Street as home sales drop, mortgage rates go into free fall, unemployment rises