The Home Affordable Refinance Program (HARP) was initiated by the government a couple years ago for the expressed purpose of allowing those homeowners who had mortgages that were “underwater” to refinance their properties and take advantage of the lower rates. These borrowers had to have played by the rules during the mortgage meltdown and made good on their repayment even while knowing their property had lost value. As a result, for Fannie Mae and Freddie Mac loans bought prior to May 31, 2009, borrowers were eligible to refinance their loan up to an amount of 120% of the outstanding balance. Recently, this restriction has been removed and HARP eligible borrowers have no limit on the loan to value. In most cases, the documentation is streamlined and there is no appraisal required. If you find yourself still underwater or know someone who is, give us a call and we can help determine if they are HARP eligible.
Recently we rolled out a new loan product that is perfect for the higher balance loans. Now a buyer can purchase a property for as much as $972,000 and put down just 10%. We will make two loans (piggy back) to the borrower, one for the maximum conforming limit of $625,500 and the other for up to $250,000. Because the first loan is less than 80%, there is no mortgage insurance (PMI) required. And unlike other piggy back loans where the 2nd trust deed is at a much higher rate, in our case the 2nd is very competitively priced, nearly as low as the 1st TD.
Since the first loan is within conforming limits, the underwriting is much more down to earth and lenient as opposed to a jumbo loan. And the rates are lower. So, if you are looking at prices above $650,000 but only have 10% down, give us a call. This “piggy back” combo is fast becoming of our most popular loan products.
For the past several years, jumbo loans have been scarce to come by and what money was available was at much higher rates with more restrictive underwriting guidelines. Now, as money has loosed up a bit, we are seeing more and more competitive jumbo fixed rate product.
Currently, we can offer 80% jumbo fixed rates for up to $1.5 million. The rates are very competitive, barely over the high balance conforming rates. Underwriting is slightly more restrictive but far more reasonable than in the past. So, if you’re looking for properties over $1,000,000 and have 20% down, give us a call and we’ll explore your options.
In the past couple months we have seen fixed interest rates slowly slip under 4%, back to levels we thought we wouldn’t see again. The market has moved the rates lower on a combination of factors. The Federal Reserve continues to keep their benchmark rate low to stimulate employment and the economy. Even with the economy showing signs of life, the inflation rate has remained well within Fed targets and given it more leeway to keep rates low at the moment. Geopolitical events have also driven investors into the safe haven of US Treasuries which keeps long term rates low.
We recently have been bouncing between 3.5% – 3.75% on conforming loans of $417,000. 15 Year Fixed is hovering right around 3%. Another great product is the 7/1 hybrid ARM where the rate is fixed for the first 7 years. These rates are as low as 3.125%, which is a considerable savings over a 7 year timeframe.
We don’t anticipate this trend in rates to last long as most economists feel the Fed will begin to tighten either in June or later in September. While we don’t anticipate rates running away, the days of sub 4% are probably only going to last a few more months. Now is the perfect time to make that purchase and lock in a low rate. Also, for those considering refinancing, now is the time. Give us a call for more information.
Wishing You & Your Family a Happy Holiday Season!
Dear Friends and Clients,
For the 29th time, I’d like to extend the warmest of Holiday wishes to all of you that we’ve had the opportunity to work with over the years. Since 1986, we’ve arranged the funding of nearly $2 billion. Thank you all for your support and your referrals. We would not be here today without you.
As you may know, 2014 was a year of transition here at CPC Mortgage. We elected not to renew our lease in Arcadia. As technology has evolved, we felt we didn’t need the space and the overhead that went with it. Our business, like so many others, is able to function in a more efficient way without the large “brick and mortar” office space. On September 1, we moved our office to Pasadena at 180 S. Euclid Avenue, just below the Paseo shopping mall. We have streamlined the operation and are all now more technologically savvy than before. Fred and I continue to work from the office but are far more mobile than in the past. Thanks to the “cloud,” we can work from the office, our homes or while on vacation. Shelly continues to process our loans but mainly from her home office. The bottom line is we are “leaner and meaner.” We have now signed on with multiple lenders that offer many more funding options than in the past.
For example, beside standard Fannie Mae and Freddie Mac conforming loans, we offer Reverse Mortgages, FHA and a very competitive array of jumbo products, both fixed and adjustable. While Fannie and Freddie have tightened their guidelines, we now have sources for interest only, stated income and can even make loans to borrowers with recent short sales on their record.
What’s ahead in 2015? For the past several years, many experts have projected higher rates as a result of anticipated inflation, largely due to the Fed stimulus programs. Now, however, the Fed appears poised to keep rates down for the time being to help further stimulate the jobs market and overall economy. Another factor is that the global economy is slowing, with recessions in Japan and parts of Europe. The U.S. economy is stabilizing and many investors around the world are seeking the “safe haven” of our treasury securities. This helps drive rates lower. In fact, it’s possible we could see fixed rates fall below 4% again in the near future. Let’s keep our fingers crossed.
There are a number of financing opportunities for potential buyers and existing homeowners. If you’re looking to purchase, fixed rates are near all-time lows. And in many cases a hybrid ARM (5, 7 or 10 Year) can be a great alternative to a fixed rate. Recently, we were offering a 10/1 ARM up to $1.5 million at 3.5%.
For borrowers with ARMS that are at or near their first adjustment, now may be a great time to re-write that loan for a fixed rate or another 5 or 7 year ARM. There’s another very important consideration for those with home equity lines of credit (HELOCs) that are approaching 10 years old. Many borrowers don’t realize that after 10 years, the low interest only payment option goes away. Starting in year 11, the payment becomes fully amortized over the final 15 years of the loan. If your HELOC balance is $150,000 or more, you could see your payment rise as much as $1,000 per month or more. Now would be a perfect time to combine your first loan with your HELOC and avoid the huge payment shock. Give me a call if you have a HELOC that is 8-10 years old and we’ll analyze your options.
Probably the biggest difference now versus the past several years is the easing of the “jumbo” market. Jumbo rates have become competitive and underwriting guidelines have loosened. Easier jumbo money along with a wider range of products should translate to an overall easing in real estate financing.
I’d like to take a second to mention my former partner, John Patterson. John is doing great in retirement. We talk frequently and get together from time to time. For those that dealt with “JP” over the years, please feel welcome to give me a call. I’ve had the pleasure of working with a number of John’s clients since his retirement and look forward to being of service to many more.
In closing, I’d like to stress that we’re here for the indefinite future and we need your loans and referrals. We even have a new website for your convenience. On behalf of Fred Olson and Shelly Dunn here at CPC Mortgage, I’d like to wish everyone a very Merry Christmas and the happiest of Holiday Seasons. Here’s to a very successful New Year for us all. I look forward to hearing from you in 2015!!