The Mortgage Minute, Super Sunday Edition!

The Mortgage Minute, Super Sunday Edition!

Greg Williams Weekly Mortgage Report

 

Happy tidings Realtors, Brokers, Bankers, and Agents and Welcome to the Super Sunday edition of The Mortgage Minute! Whether you’re an Eagles fan, Chiefs fan, or agnostic, we hope you have your fill of family, food, and fun this Sunday!


Product of the Week

Unfortunately, this week’s product focus is on the impending mortgage rate increases for large swaths of buyers.

Both Fannie Mae and Freddie Mac have announced significant “Loan Level Price Adjustments” that will have far reaching impacts on buyers opting for conventional loan financing. New LLPAs have been introduced across the board, this week we’ll focus on the impact on purchase money transactions.

The NAR has issued a statement regarding the adjustments.

“…fees are raised on some borrowers with good credit scores and moderate down payments, hitting middle-wealth homebuyers. Furthermore, FHFA included new fees on borrowers with higher debt-to-income scores. NAR will review other changes in the new LLPA structure and share our concerns with the FHFA.

In the wake of a three-percentage point increase in mortgage rates, now is not the time to raise fees on homebuyers. Furthermore, the FHFA needs to address its recent increase in fees on homebuyers in high-cost markets as well as guarantee fees that impact all homebuyers. Homebuyers are hurting and these changes are overdue. Now is the time.”

https://www.nar.realtor/newsroom/nar-statement-on-fhfa-llpa-structure-changes

This table shows the current matrix and associated pricing adjustments based on credit score, loan to value, property type, etc.

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And this table shows the new LLPAs set to arrive for conventional mortgages delivered after May 1, 20023. Lenders will likely implement the news adjustments beginning in March. 

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There are new tranches for credit scores from 740-779 and additional adjustments for applicants with a debt to income ratio in excess of 40%. Conventional loan guidelines will generally allow up to a 50% debt to income ratio for well qualified buyers.

Let’s see what impact this will have on a common scenario:

Buyer has a 735 credit score with 43% DTI putting 10% down on Owner Occupied SFR with purchase price of $400,000:

Currently this client would face 50 bps in LLPAs according to the matrix.

Under the new guidelines set to start May 1, this buyer would face 100 bps for loan to value/credit score and an additional 37.5 bps for the debt to income ratio in excess of 40% for a total of 137.5 bps, or a difference of .875% in points compared to the current environment.

Bottom line impact, the buyer pays an additional closing cost fee of .875 pts, or $3,150 on a $360k loan amount. The buyer may opt to take a higher interest rate in lieu of paying the points, which would translate into a rate of .5% to .75% higher than what they see under the current guidelines.  On a $360k loan amount, paying a .5% higher rate increases annual interest expense by $1800 or $54,000 over the life of the loan.

With the housing market still in recovery from the largest interest rate increase shock in US history, these additional upward pressures on rates are ill advised and poorly timed. 

I believe it would be prudent for FHFA/FNMA/FHLMC to delay implementing these costs until after the Federal Reserve’s interest rate tightening campaign subsides. We encourage your comments on this impending issue.

*Opinions expressed are solely my own and do not express the views or opinions of my employer


Average Mortgage rates jump to mid 6s


    The average 30 year fixed rate rose sharply to 6.50% from 6.19% the prior week. This up to date info is provided by the weekly rate survey from Mortgage News Daily. Mortgage rates have dropped more than a full point since their Fall highs. We saw them briefly drop below 6% after the recent Federal Reserve meeting but a strong jobs and ISM report pushed them back over 6%.

    With interest rates set to increase for numerous buyers due to the FHFA announcement, now would be an opportune time to reengage your clients and let them know about their window to close before these rate increases are enacted.

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Help us help you!

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Realtors, you can use our unique products and grants to market to market your listings. If you’ve got listings in low or moderate income census tracts, most potential buyers would be eligible for at least $4k in grant funds which can be used to pay closing costs. Our Home Start program works in conjunction with the grants and offers up to 100% financing with no PMI!

We’re happy to help determine the census tract for your listing, just give us a call and we’ll walk you through the process 😊

We’re always looking for opportunities to engage with our communities, let us know if we can sponsor your group for a future event. 

Let’s sell some homes!

Have a great week! 

Greg Williams

AVP/Senior Mortgage Banker

404-457-4143 cell | 

2987 Clairmont Road, Ste 150

Atlanta, GA 30329

NMLS# 151412


https://www.firsthorizon.com/mortgage/greg-williams

Equal Housing Lender

We do Business in Accordance with Federal Fair Lending Laws

UNDER THE FEDERAL FAIR HOUSING ACT, IT IS ILLEGAL, ON THE BASIS OF RACE, COLOR, NATIONAL ORIGIN, RELIGION, SEX, HANDICAP, OR FAMILIAL STATUS (HAVING CHILDREN UNDER THE AGE OF 18), TO:

Deny a loan for the purpose of purchasing, constructing, improving, repairing, or maintaining a dwelling, or to deny any loan secured by a dwelling; or

Discriminate in fixing the amount, interest rate, duration, application procedures, or other terms or conditions of such a loan, or in appraising property.

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