Adjustable Rate Mortgages Are An Absolute Steal Right Now. Have You Checked The Rates Lately?

Each week, government-backed Freddie Mac publishes a weekly mortgage rate average compiled from 125 banks across the country. Based on this week's survey results, home buyers in California would be silly to not at least consider the 5-year ARM.

The 5-Year ARM Is A Steal-Of-A-Deal Right Now

As compared to the 30-year fixed, the 5-year ARM is an absolute steal.

Consider this comparison:

•In April 2009, the two products ran neck-and-neck with respect to interest rates
•In April 2010, the two products are split by 0.99 percent chasm

On a $300,000 home loan, that's a difference of $176 per month on a mortgage payment.

Some Folks Are A Perfect Fit For The 5-Year ARM

Now, adjustable-rate mortgages aren't suitable for everyone, but they can be a terrific fit given your individual circumstance. For example, any of the following scenarios might warrant a 5-year ARM instead of a 30-year fixed:

1.You're buying a home and plan to sell it within the next 5 years
2.Your home is currently financed with a 30-year fixed mortgage and you have plans to sell your home within the next 5 years
3.You have an ARM now and want to get a "restart" on your starter rate

Before opting an ARM, speak with your loan officer about how adjustable-rate mortgages work, and what longer-term risks may exist. The savings may be tempting, but there's more to consider than just the payment.

How To Apply For A 5-Year ARM At 3.875 Percent

To inquire about a 5-year ARM, call my office at 510-799-1400 or 800-259-3424 or send me an email. We can review your situation and if the ARM isn't too risky for your goals, we'll move on to an official application and start working toward closing.

Most new mortgages are closing in 3 weeks.

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John Payne is an active loan officer. Email John@JohnPayneLending.com or call 510-799-1400 or 800-259-3424.

Defending Your Home From Mortgage Rate Velocity

Life is getting difficult for home buyers and rate shoppers. Since the start of April, mortgage lenders are averaging 2.25 rate sheets per day.

Mortgage Rate Velocity -- the pace of rate sheet change -- is as high as it's been in a year.

What Is A Mortgage Rate Sheet?

A rate sheet is a mortgage bank's "menu". It lists rate-and-points combinations for every loan product available. Some rate sheets are just a page; others go 10 pages or more. Most are now electronic.

Rate sheets show the "right now" pricing on products including:

•30-year, 20-year and 15-year fixed rate mortgages
•Short-term ARMs like 1-year and 3-year products
•Long-term ARMs like 5-year, 7-year and 10-year products
•Jumbo and super jumbo mortgages
•The complete line of FHA and VA mortgages
•Loans for condotels and non-warrantable condos

Rate sheets change with the market and, lately, markets have been wild.

Mortgage Rates Are Changing Every 3 Hours, On Average

In January, mortgage rates changed every 6 hours. Since late-March, however, they've changed every 3 hours.

That's two times as fast. There's no "calling you back in the afternoon" or "thinking about it overnight" in a market like this. Unless you're watching real-time market updates, it's pretty much a guarantee you'll get burned.

Want that rate you were just quoted? You better lock it right this second.

It's Going To Get Even Worse For Rate Shoppers

The pace of change in April is just the beginning. By June, today's Mortgage Rate Velocity will look tame; as a turtle to a hare.

The Fed is officially gone from the mortgage market and its absence has left markets in doubt. The Fed was a stabilizer, if nothing else, and with it gone, there's questions about whether investors will step up to fill the demand void. Especially because stock markets are throwing better returns and debt concerns are easing around the world.

Mortgage bonds fared well in 2009 because the world was on fire. This summer, that won't be the case. Mortgage Rate Velocity will eclipse its all-time highs.

Shield Yourself From Mortgage Rate Velocity

As a loan officer, I track mortgage data in real-time, and summarize it online to to Facebook. I send alerts to my audience before new rate sheets come out so everyone can stay ahead of the market.

You need to be plugged in. If you manage them right, my alerts should save you tens of thousands of dollars over the life of your mortgage. It'd be silly not to pay attention, really.

However, being "alert" is only one part of being ready. You must also have a loan application on file with your lender.

Banks can't give rate locks without full applications.

Applications-by-phone are a 4-minute process. To give one, call my office at 510-799-1400 or send me an email. Then, when it's time for you to lock, you'll be glad you were ready. Markets move quickly and your mortgage is a huge financial instrument. It's not something to gamble with.


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John Payne is an active loan officer. Email John@JohnPayneLending.com or call 510-799-1400 or 800.259.3424.

Breaking Open The Fed Minutes For Clues On April's Mortgage Rates

Mortgage markets improved yesterday after the Federal Reserve released its March 16, 2010 meeting minutes. It's good news for California home buyers and rate shoppers -- rates could have just as easily gone the other way.

The Meaning Of The Fed Minutes

The Fed Minutes is a detailed recap of the debate and discussion that shapes the nation's monetary policy. The notes are dense; it takes 3 weeks to compile them for publication.

As compared to its more well-known, post-meeting press release cousin, the Fed Minutes are extremely lengthy. In word counts:

•March 16 press release : 451 words
•March 16 meeting minutes : 6,152 words
If the press release is the executive summary, in other words, the Fed Minutes are the novel.

A Not-So-Hidden Message On Inflation

The extra words matter.The minutes recount what the Fed did, how the Fed did it, and what the Fed plans to do next. And, in the minutes, Wall Street looks for clues.

This is why the report is important to every rate shopper in the country.

When the Federal Reserve publishes the minutes from its meetings, it leave clues about the groups next policy-making steps. For example, in March's Fed Minutes, it's clear that the Fed's concern about inflation is hugely diminished and that's a major plus for the mortgage bond market.

Inflation causes mortgage rates to rise. The absence of inflation, therefore, helps them to fall. This improves home affordability, among other things.

The Fed Explains Why Home Sales Are Strong

Similarly, the Fed Minutes note that real estate sales may have been worse throughout the winter months if not for low mortgage rates and the sense among Americans that home prices were troughing. We may infer, therefore, that rising rates may suppress home sales later this year.

Markets are always looking for clues from inside the Fed and the last meeting's minute signal that the economy is on its way up. If you're looking for a bargain in the housing market, your window to act may be closing.

Going under contract for home this week or this month? Click here to send me an email and get a competitive rate quote.

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John Payne is an active loan officer. Email John@JohnPayneLending.com or call 800.259.3424

With More Homes Going Under Contract, Home Prices Certain To Rise This Spring

As expected, the Pending Home Sales shot higher in February, boosted by the federal home buyer tax credit's April 30 deadline.

Pending Home Sales Spike

Versus the month prior, February's index rose 8 percent but remains well off the highs set last October.

For today's home buyers and seller, the Pending Home Sales Index is an important measurement. This is because a "pending home" is a property that is under contract to sell, but not yet closed.

According to the National Association of Realtors®, 80% of homes under contract close within 60 days, historically. Therefore, a higher Pending Sales figure in February projects that April's Existing Home Sales will be higher, too.

More Pending Home Sales Means Higher Home Prices

If you're a California home buyer today, no doubt you've noticed the extra market activity.

On right-priced homes, multiple offer situations are more common; sales prices are settling closer to listing price; Days on market is falling. These are the signs of a buyer-heavy market. It drives home supplies down and home prices up.

It's a good time to be a seller, in other words. Especially as buyer activity looks poised to peak.

Get Ahead Of The Surge To Get The Best "Deals"

When the home buyer credit faced its last expiration in November 2009, we saw a pattern of buyers rushing to beat the deadline. There's no reason to expect that won't happen again. And as it does, Pending Home Sales should continue to climb. Average home sale prices should rise.

Home buyers may find it smart to go under contract sooner rather than later. Pending Home Sales is a warning shot. Higher home sales figures are ahead.




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John Payne is an active loan officer. Email John@JohnPayneLending.com or call 510-799-1400 or 800-259-3424.

Spring 2010 FHA Changes : Higher Fees, Bigger Downpayments, And More Mortgage Insurance

Looking to FHA for your next mortgage? Get a move on! Although you have until Friday, April 2, 2010 to get your application in, Friday is Good Friday and most banks will be closed.

Your true FHA deadline is Thursday, April 1.

Guidelines Change In 3 Days

To shore up its balance sheet and dwindling capital reserves, the Federal Housing Authority is rolling out sweeping financial changes. Starting next week, FHA borrowers must look better on paper and to be better credit risks.

Mortgage insurance premiums are rising, too.

In its official announcement, the FHA said its trying to better position itself to "manage its risk while continuing to support the nation’s housing market".

The changes start with case numbers assigned on or after Monday, April 5, 2010.

Reviewing The FHA Mortgage Changes

One widely speculated change wasn't made -- the increase of the FHA minimum downpayment. Homebuyers in California and elsewhere can still buy with just 3.5 percent down. However, the group did roll out a number of other changes, including:

•An increase in Upfront MIP from 1.75 percent to 2.25 percent
•A plan to reduce maximum seller contributions from 6 to 3 percent by summer
•A Congressional request to increase monthly mortgage insurance premiums

Furthermore, the FHA's new guidelines institute a minimum FICO requirement of 580 to make the minimum 3.5% downpayment, requiring 10 percent for any applicant whose credit score falls below that level.

2010: The Year Of Investor Overlays

But, just because the FHA allows 580 FICOs, banks don't have to allow it.

The official term here is "investor overlay". It's when banks use Federal Housing Authority guidelines as a starting point for their own set of underwriting rules which are often more strict.

And banks have a good reason for making investor overlays.

In January, the FHA subpoenaed 15 lenders -- none where from Calfornia-- because of abnormally-high FHA default rates. The act was a shot across the bow, it appears, because more lenders have been shut down since.

The FHA made a loan performance benchmark and if a bank's defaults exceed the mean by x number of sigmas, said bank loses its FHA license. Period.

Expect FHA investor overlays to be a running theme of 2010.

Your FHA Mortgage Denial May Be Reversible

Starting immediately, FHA mortgage guidelines will vary from bank-to-bank as lenders get more active about their originated mortgages. Going forward, what gets FHA-approved at Bank of America, for example, may not be FHA-approved at Wells Fargo.

FHA loans will now be denied simply because the applicant applied at the "wrong bank".

If your mortgage has been denied or you just want to have the best chance of being approved possible, call or send me an email with some notes on your situation. I am a FHA approved Mortgage Broker and work with several HUD-approved lenders.

In other words, apply once and I'll automatically align with the best pricing and fewest overlays. Click here to email me about getting started.


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John Payne is an active loan officer. Email John@JohnPayneLending.com or call 510-799-1400 or 800.259.3424.

Say Good-Bye To Histroical Low Mortgage Rates

Mortgage rates tend to climb with the mercury. It's been the case in each of the last 4 years. As spring months turn into summer, the average 30-year fixed mortgage rate rises.

This year should be no different.

The Environment Is Ripe For Rates To Rise

With mortgage rates artificially suppressed and U.S. inflation expectations at a minimum, the current mortgage rate environment is extremely consumer-friendly. Few people expected 5.000 percent rates to be available this late into a recovery.

But with the economy showing signs that recovery is sustainable, pressure is on for rates to rise.

•Retail Sales data shows consumers are out spending again
•Job growth gets closer to net positive, month-by-month
•Home values have stopped falling, and, in some markets, are rebounding

Each of these factors draws money out of the relative safety of the bond market and into the riskier world of stocks.

Furthermore, the price of gas is rising. It's up 20 cents per gallon in the last 30 days. No doubt you've noticed. Rising gas prices are inflationary and when gas prices rise, we find that mortgage rates are usually right behind.

The Fed's Buyback Program Ends 7 Days From Now

There's another reason for rates to rise this season, too. It's the Federal Reserve's mortgage buyback program.

More specifically, its pending ending.

The Fed's buyback program was, by most accounts, a success. Rates are an estimated one percent lower than they would have been without the Fed's intervention, and the rate drop happened without much disruption in day-to-day mortgage market trading.

However, the Fed's program ends next week. March 31, to be exact. And when the Fed leaves the market, there's going to have to be someone to pick up the slack demand or else mortgage rates will have nowhere to go but up. This is because mortgage rates move opposite of mortgage bond prices.

Yields rise as a result.

Beware Of Inflation

Inflation expectations are low for now, but that can change quickly. It only takes a series of strong economic data to make Wall Street question what's really ahead for the U.S. consumer. Inflation is the enemy of mortgage rates and its presence makes rates rise.

Therefore, use the mortgage rate chart to your advantage. You can see what's happened to mortgage rates in each of the last 4 summers -- 2010 should follow suit. And when the mortgage market turns for the worse, it's going to turn quick. Be ready for it.

Get Locked In March Or April

Email me anytime and we can talk about your mortgage situation -- purchase or refinance. You don't need to lock a rate today -- you just need to be ready to get it done because when it's time, it's time. As soon as you notice rates are higher, it'll probably be too late to do anything about it.


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John Payne is an active Mortgage Planner. Email John@JohnPayneLending.com or call 510-799-1400 or 800-259-3424.

February 2010: California Leads the Nation in Foreclosure Activity

Foreclosure-related filings topped 300,000 last month, according to foreclosure-tracking firm RealtyTrac.

Nationwide, 1 in every 418 households was served some form of foreclosure notice but -- as always -- foreclosures are more common in some areas than others.

In February 2010, 4 states accounted for more than half of the country's foreclosure-related activity:

•California : 22.2 percent
•Florida : 17.5 percent
•Michigan : 6.5 percent
•Illinois : 5.6 percent

Combined, these four states represent 56% of foreclosures but just 25% of the population. Clearly, foreclosures are a local phenomenon.

They're also the spring season's biggest story.

Because foreclosures and other "distressed" homes tend to sell at a discount, they now account for 38 of all home resales. This is up from 33 percent in the month prior.

For first-time homebuyers, move-up homebuyers, and even for investors with more than 4 properties, buying foreclosures in California has never been easier.

Foreclosures are big business and new listings are available 24/7.

My clients have told me these 3 websites, in particular, are a good place to start for foreclosures, if that's what interests you. Each site offers a free, 7-day pass and that's usually enough to help you scout the market for something worth buying.

1.RealtyTrac offers free access to foreclosure listings
2.Foreclosure.com offers free access to foreclosure listings
3.HUDForeclosed.com offers free access to foreclosure listings

Then, when you see something you like, talk to your real estate agent about it, or ask me for a referral by email to a skilled foreclosure-specializing agent. Negotiating for a bank-owned home is different from negotiating for a "regular" home.

You're going to want somebody experienced on your side.

High foreclosure levels have led to interesting buying opportunities. Do your search and see what comes up for you locally. Then, when you're ready for your pre-approval letter, call me and I'll take care of you. I'm experienced with short sales and REOs and would be happy arrange for your mortgage.

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John Payne is an active loan officer. Email John@JPMortgageLoans.com or call 510.799.1400 or 800.259.3424.