SPECIAL POST!!!!!!!!!! 01/ 26/10 6:30 PM PST

Today was the third day (out of four) that we knocked on the door of the 100 day MA. Again, nobody answered. The market does not like to knock a fourth time. Tomorrow or Thursday, we will most likely retreat and leave the front door, OR, we will blast through it and rally.

This comes at an interesting time....tomorrow the fed will give their interest rate decision after the 2 day FOMC meeting. The market will also be asked to digest today and tomorrows auction AND new home sales. The bigger news will come on Thursday...Jobless claims and Durable goods. So, you must ask yourself what the news will bring and know that the markets will react strongly, as the technicals are poised for such a reaction.

I look for the following:

1) Fed will keep rates unchanged, but may make cautionary comments about the healh of the economy

2) Jobless Claims should rebound from last weeks terrible number

3) New Home Sales should be soft based on the other housing numbers we have seen

4) Durable goods, may show an interesting rebound

If I am right about these forecasts, we should see a trending back to the lows of early January. Having said that, I first see a suckers rally...with Bond prices moving up fast.
Just wanted to give everyone a heads up as my gut is telling me this will not be a "typical" trading week.

Make good decisions and stay conservative. You can't go broke locking and closing loans! :-)

I am waiting for either rates or prices to come down, how can I lose money in the process?

The biggest challenge for the consumer in today’s real estate market is getting the right timing on all the moving pieces. The internet is crawling with misinformation about the housing market, the mortgage market and everything else related to real estate. The other big challenge, the rest of the world keeps moving and it is next to impossible to control all of the variables that can impact getting your best deal.

In fact, if you are trying to take advantage of the current reduction in purchase prices in the Real Estate market generated by the foreclosure crisis, you are not alone. However, trying to guess the bottom of the market in both interest rates or housing prices should be a fool’s errand; because if this crisis passes before you have made your purchase, you will pay much more later for homes that are “on sale” today through higher interest rates, higher prices for the homes or both.

When considering the options presented in this market many people expect that somewhere, someone will wave a big flag that says “Do It Now!!” The best time will not be announced to you by some outside force. Markets will keep moving and you need to educate yourself so that you can see the signs when they appear.

Here are several things that most people are not aware of or don’t completely understand when it comes to today’s Real Estate market.

Here are some facts:

• Prices are down. In some markets as much as 50% over where they were just a few years ago. How much lower do you think they will go?
• Interest rates are down. From the high sixes a couple of years ago to the high four percents today. How much lower do you think they will go?
• There is a cost associated with continuing your current path. If you rent this payment does not go away. Have you quantified this cost?

Some general rules of thumb when looking at this market.

• Don’t expect another 50% drop in prices from here. The big drops are already in.
• It will likely become more difficult, not less, to secure financing over the next twelve months than it is today.
• The most attractive properties will move first. Waiting will not give you access to the great properties..

One of the strategies that I provide for my clients and professional partners is called a Cost of Waiting Analysis. I can provide a complimentary consultation to learn about your objectives and see how we can develop a strategy to get you off the fence and into the market to win the best deal possible for your specific situation. The discussion requires I obtain a few pieces of information from you, gathering that data takes less than 10 minutes. Leave no stone unturned in your efforts to get financing.

To be able to schedule a no obligation, exploratory conversation to determine the right strategy, contact me at 510.799.1400 or toll free at 800.259.3524 or email John@JPMortgageLoans.com.

Be sure to ask about the complimentary Total Cost Analysis report. If you decide to take action and secure a mortgage the Total Cost Analysis helps you choose the right mortgage, based on the numbers.

What do you have to lose? More importantly, what do you have to gain?

I have the key to securing a great deal for you to capitalize on this opportunity.
Connect me today to start the process of exploring the numbers and becoming a buyer with a competitive edge. Again no cost or obligation to you, this is a community service I provide.

Is Your California House Worth Less Than What You Owe? A Refinancing Guide For Homeowners With Negative Equity

If you're like 8 out of 10 homeowners in California that owe more than their house is worth, but could benefit from refinancing your home mortgage to a lower rate, then continue reading. The first step would be to determine who actually owns your home loan. Chances are pretty good the mortgage servicer, the bank that sends you the payment statement, and the "actual owner" of the mortgage are two different parties.

Is your home loan owned by Fannie Mae?
If so, Fannie Mae now offers the Desktop Underwriter (DU) Refi Plus Program. This home mortgage refinancing program will prevent unnecessary foreclosures by lowering monthly mortgage payments for millions of eligible homeowners.

What This Means For You...
Through refinancing, borrowers like you can take advantage of today's low rates and reduce their monthly payment. This will help monthly cash flow for millions of families across the nation. Another goal of the DU Refi Plus Program is to help homeowners who live paycheck-to-paycheck, stabilize their finances. This means Fannie Mae and other lenders will now turn riskier loans, such as Adjustable Rate Mortgages (ARM), into more stable loans, such as Fixed Rate Mortgages (FRM).

Easier to Qualify Than Before...
The purpose of the DU Refi Plus Program is to help the economic burden that many of us face today. One way to help with this is to offer assistance to homeowners who were previously ineligible. Under the new DU Refi Plus Program, Fannie Mae reduces eligibility restrictions and requires less documentation.

• Previously, Fannie Mae required applicants to show two current pay stubs as income verification. Under the DU Refi Plus Program, applicants can show only one current pay stub.
• On certain loans, Fannie Mae will now waive appraisals.
• Previously, Fannie Mae would not handle loans over 80% of your home's market value. Now, applicants may have a loan-to-value (LTV) ratio between 80-105% and NO MORTGAGE INSURANCE is required on the new loan.
• Fannie Mae will now accept applicants with a credit score less than 580, if their LTV is 80% or less.

DU Refi Plus Terms and Conditions

Though Fannie Mae will now help more homeowners than ever before with DU Refi Plus, there are still certain restrictions that will apply:

• Loans must be owned by Fannie Mae.
• Any existing subordinations have to be re-subordinated.
• Limited cash-out refinancing (less than 2% of loan, or $2,000).

Ineligible new loan products for the DU Refi Plus program are:

• An ARM with fixed terms less than 5 years.
• An interest only mortgage.
• A balloon mortgage.

You may also be ineligible to participate in the DU Refi Plus program if you made a payment more than 30-days late within the past year.

If you have any questions about how to reduce your monthly mortgage payment, contact John Payne today at 510-799-1400 or 800-259-3424 or John@JPMortgageLoans.com.

The FHA 203(k) Loan - The PERFECT Solution To Repair Your New California Home

The FHA 203(k) Rehabilitation Loan was started as a tool to help the revitalization of neighborhoods and communities in California and throughout the United States. The 203(k) loan program offers borrowers the resources to rehabilitate or repair their new home that may be in need of limited repairs and/or upgrades without exhausting their savings. This can be used for either the purchase of a fixer-upper or the refinance of a home you currently occupy. One single loan is used to pay for the purchase (or refinance) and the cost of renovating the home.

The FHA 203(k) loan is available to borrowers of all income levels who plan to occupy their house in California. This loan also opens the door for many California first-time homebuyers and applicants with less than perfect credit, while still allowing for low down payments. Properties eligible for this product include any single family residences, condominiums, manufactured homes, townhouses and properties with one to four units located in California.

The Streamlined 203(k) program is intended to facilitate uncomplicated rehabilitation and/or improvements to a home for which plans, consultants, engineers and/or architects are not required. The repairs costs can be up to $35,000 and there is no minimum requirements. (***Please note there are also 203(k) loan programs available without a maximum repair cost amount and additional improvements capabilities.)

The following is a list of some of the eligible improvements and/or repairs:

• Repair/Replacement/Upgrades of roofs, gutters, HVAC systems, plumbing, electrical systems and flooring
• Minor remodeling of kitchens and bathrooms
• Purchase and installation of appliances
• Painting - exterior and interior
• Weatherization including insulation, weather stripping, storm windows and doors
• Window and door replacement and exterior wall re-siding
• Lead based paint stabilization and abatement of lead based paint
• Repair/Replace/Addition of exterior decks, patios and porches
• Repair to existing swimming pools up to $1,500
• Repair/Replacement of septic system and wells
• Accessibility improvements for persons with disabilities
• Finishing/Remodeling of basements, not including structural repairs

The actual cost of the renovation is based upon the contractors' accepted contracts specifying the scope of work, cost of materials and labor and timeframe. All repairs must be completed by a contractor within 6 months of the closing date. Borrowers are required to have the necessary expertise and experience to perform work.

Please feel free to contact John Payne at 510-799-1400 or 800-259-3424 or John@JPMortgageLoans.com for any additional questions related to the 203(k) Rehabilitation Loan.

My 203(k) FHA Loan Closed - What Happens Now?

Are you purchasing a home in California? Is the house bank-owned, does it need some TLC, or would you just like to paint, carpet and put in some new appliances? The FHA 203(k) Streamline loan is the perfect solution.

FHA Streamline 203(k) mortgage program allows California homebuyers up to an additional $35,000 into their mortgage, to improve or upgrade their home before they move-in. California homebuyers can use this type of loan to pay for property repairs, such as those identified by a home inspector or FHA appraiser. These improvements are not just limited to repairs and can also be cosmetic upgrades to the existing property. Now that you have gone through the whole financing process and you have reached your closing date, what happens next? Rehabilitation construction should begin within 30 days after closing, and all work must be completed within six (6) months from the closing date.

How does your General Contract get paid? After the closing, your loan is typically sold to a servicing company, like Bank of America. This process normally takes 7-10 days, but is currently taking approximately 21 days. This is due to an influx of new loans being purchased from the recent closure of various mortgage lenders. After the loan is sold, 50 percent of the rehabilitation funds are disbursed immediately to the borrower and/or contractor. Included with the initial disbursement is an instruction letter that explains how the final disbursement will be made upon completion of all work. If the cost of the renovation is over $15,000, an inspection by the original appraiser is required.

For borrowers working with a contractor, a W-9 must be provided to set up the contractor, and a two-party check is made out to the borrower and the contractor and sent to the borrower. If multiply contractors are being used, 50 percent of the cost of the repairs for each contractor is disbursed up front. For borrowers performing work themselves, a self-help agreement must be signed before the funds are disbursed. The check is then made out directly to the borrower. A borrower is typically only allowed to perform work themselves if they have experience in that line of work.

Who handles all of the disbursements and other requirements during the rehabilitation process? The servicing company handles all rehabilitation disbursements and project inspections. The amount designated for repairs and improvements, including the contingency reserve, holdback, and PITI, if applicable, are deposited into an interest-bearing repair escrow account, insured by the Federal Deposit Insurance Corporation (FDIC).

What happens if your repairs have unexpected costs? The contingency reserve is required to cover unexpected repairs. The reserve is usually only required if the repairs exceed $7,500 and is typically 10 percent of the total repair amount. The contingency reserve can only be used on those changes that affect the borrowers health and safety, or is due to an increase in cost for an item of necessity. If a change order results in a decrease in costs, the amount will be added to the contingency reserve. Additional improvements that do not affect the health and safety, or an increase in cost due to a necessity item, must be paid directly by the borrower and not paid out of the contingency reserve fund. The remaining balance in the contingency fund, after all work has been completed, will be used to pay down the principal balance of your loan.

Congratulations! It's time to relax and enjoy yourself.

If you're considering purchasing a home that may need some cosmetic upgrades or repairs, please contact John Payne to get pre-approved, John can be reached at 510-799-1400 or 800-259-3424 or John@JPMortgageLoans.com.

So What's My Home Rate?

"So what's my home loan rate?" This is the question asked to loan originators everyday from our clients and prospects. There is no simple answer and it seems to be getting more complex as the mortgage industry moves toward more risk-based pricing. Risk-based pricing allows adjustments to par pricing for risk factors such as; FICO scores, loan-to-value percentages, property type (SFR, Condo, 2-4 Units), occupancy (Primary, Vacation or Investment) and mortgage type (Interest Only, Adjustable Rate etc).

Let's start off with the basic mechanics of fixed mortgage interest rates. Interest rates are primarily based upon the pricing of Mortgage Backed Securities ("MBS" or "Bonds") issued from Fannie Mae ("FNMA"), Freddie Mac ("FHMLC") and Ginne Mae("GNMA"). Think of a Bonds' sales price similar to that of a Stock, it trades up and down during the course of a day. At the time of writing this article, the FNMA coupon we are tracking is selling for $100.81. This is down 22 basis points from the previous day's closing price of $101.03. In simple terms, the consumer would have to pay an additional .22% of their loan amount to have the same rate today that they could have locked in the previous day.

"So...what does all this mean?"

In our example, the client's interest rate could vary from 4.50% - 5.25%. The mortgage interest rate will depend on how the customer would like to set up their mortgage loan with regard to paying either higher or lower upfront fees. Clients locking in a rate should consider how long they intend to have this mortgage loan before considering the fees associated with obtaining any rate. The shorter amount of time you will have the loan, the more it makes sense to pay lower fees and have a higher interest rate. The longer your time horizon for keeping the loan, the more it makes sense to pay higher upfront fees, also known as buying down the interest rate.

A client locking in a rate of 4.50% (5.597% APR) today on a 30-year fixed FHA loan should plan on paying all the customary fees with two discount points. Customary fees would include appraisal, credit report, processing fee, underwriting fee, origination fee, title fees, and recording fees. That same client could lock in 4.75% (5.747% APR) with 1 discount point, 5.00% (5.896% APR) with no discount points and 5.25% (6.044% APR) without any discount points or origination fee. An origination and/or discount point is typically 1% of your loan amount.

With so many rates available on a 30-year fixed mortgage, how can a borrower get the best rate?

First, ask the lender to provide you with a total overall cost analysis. This should illustrate the proposed savings you will have on the loan options available to you both on a monthly and long-term basis. This analysis should also include total payments, total interest paid, total closing costs, points and balance remaining at a given point in time. One of the most important metrics to consider is how long you plan on keeping this loan on the home you purchase or refinance when selecting the right mortgage plan.

Second, we recommend working with a professional who watches, articulates and understands the interest rate markets. If you're a consumer, it's important to understand that interest rates can change daily, even hourly. So, if you are comparing lender rates and fees - this is a moving target on an hourly basis. If you are comparing two quotes from different lenders, you may be comparing apples to oranges. The only way to get a truly accurate comparison is to have the quotes prepared on the exact same day, at the exact same time, with the exact same terms and conditions. You also must know the length of the lock term (i.e. 15 day, 30 day, 45 day, etc.) you are looking to secure, since longer rate locks typically carry slightly higher interest rates.

I provide a daily recommendation to my client's advising them to float or lock their home mortgage interest rate. In this update, I list the current pricing of the FNMA 30-Year Bond and the previous closing price. I identify the key current market updates and the daily economic news releases that are influencing interest rates. I also provide an illustrative picture with our written recommendation, which makes it easily understood.

In conclusion, I feel that having access to valuable information regarding the total overall long-term cost, along with mortgage options that best fit their needs, coupled with market knowledge will allow you to obtain the overall lowest cost mortgage with the best loan rate available.

For more information on rates, fees and your personal mortgage options, contact John Payne at 510-799-1400 or 800-259-3424 or email John@JPMortgageLoans.com

Mortgage Rates Are Low, But Maybe Not For You, Specifically

If you've ever wondered why loan officers can't give you the best "advertised rate", it's not because of a bait-and-switch scheme or something worse. Most likely, you're being quoted higher mortgage rate because of a government mandate called Loan-Level Pricing Adjustments (LLPAs). LLPAs are changes in loan costs based on your personal risk traits. Fannie Mae and Freddie Mac first introduced LLPAs in April 2008 and they've been a constant cause of consternation among conforming borrowers since.

The problem is LLPAs aren't exactly Prime Time news and so the first time people hear about them is at the point of application. LLPAs can raise a person's mortgage rate by a full percentage point or more.

To understand what LLPAs are and how they work, let's talk about auto insurance. For all of us, there is some base insurance rate for which we all qualify. It's based on our age, our credit and the ZIP code in which we park the car. From there, however, adjustments are made -- drive a riskier car, pay a higher premium. Have a history of accidents, pay a higher premium.

The same goes for mortgage loans. The more the risk, the higher the rate.

A few of the risk factors that can change a person's mortgage rate includes:

• Living in a condo with less than 25% equity in the home
• Having a credit score less than 740
• Living in a 2-unit, 3-unit or 4-unit home
• Using a home as an investment property
• Doing a "cash out refinance with less than 40% equity in the home
• Having a second mortgage to subordinate

Each of these traits -- historically-- increases the likelihood of your default. Therefore, to hedge, Fannie Mac and Freddie Mac charge flat fees to offset potential future losses.

LLPAs are not discretionary fees; sources of profit or padding. Nor are they junk fees. LLPAs are mandatory costs triggered by specific loan characteristics. There's no flexibility, either. If you trigger the guidelines, you pay the fees.

The Fannie Mae Loan-Level Pricing Adjustment chart is as thorough as it is punitive. At least borrowers get to choose how they pay them:

1. LLPAs can be paid as a traditional "closing cost", due at closing
2. LLPAs can be built into the interest rate. In general, interest rates increase 0.250% for each 1 percent of the loan-level pricing adjustment.

It doesn't take much to trigger the risk-based pricing of Fannie Mae and Freddie Mac; a lot of conforming mortgage applicants do it.

If you've triggered the LLPA chart and want to know your options, call or send me an email. Depending on your loan traits, there my be non-government programs that can give the same great rates as Fannie and Freddie, but without the risk fees.

Be sure to ask me about it. I answer all my own emails and would be happy to help you however I can.

John Payne is an active Mortgage Planner. Reach John via email at John@JPMortgageLoans.com or call 510-799-1400 or toll free 800-259-3424.

Mortgage Rate Predictions For The Next 30 Days (Jauary 18, 2010)

Need a mortgage rate prediction? This blog report may point you in the right direction.

I came across a Bankrate.com survey and thought to share it . The bankrate.com survey is for conventional, conforming mortgages only. It does not apply to FHA mortgages or jumbo mortgages. Nor is the survey specific to California. Email me , John@JPMortgageLoans.com, anytime for a real-time rate quote.

Here's the survey's 30 day prediction for mortgage rates:






36% predict mortgage rates will increase

18% predict mortgage rates will decrease

46% predict mortgage rates will remain unchanged





I expect mortgage rates to remain unchanged, as long as the Feds are purchasing Mortgage Back Securities (stay turn to see if this continues after March 2010). My advice my not be appropriate for your individual situation and I'm not always right (just ask my wife). Ultimately, you may find your time better sent on learning that George Washington invented instant coffee than reading my analysis.


Either way, here's what I think:


"Markets move into wait-and-see mode on the economy and the Fed."


It's been a wild few weeks in the mortgage markets. December was a shoot-out that left every "floater" dead. Since the New Year, though, markets have been easing and rates have been falling. The market is closed today, Martin Luther King's Day. But last week, mortgage rates were at their best levels of the year.


In an it-won't-sound-so-strange-once-you-understand-how-mortgages-rates-work kind of way, rates are down for the same reason they were up -- EXPECTATIONS on the economy.
See, when December started, the jobs report showed net job growth very close to flat. Wall Street got very excited about it. Plus, housing showed more growth and Retail Sales punched in way bigger than projections. At the same time, members of the Fed were stumping for a raise in the Fed Funds Rate and a need to be wary of runaway growth. This, too, got Wall Street excited and as of December 31, 2009, the economy hinted at recovering and expanding at ludicrous speed. Because of this, mortgage rates made there biggest 1-month jump of the year in December. Since then, however, it's been a mixed bag.


January's job report and retail sales report both went negative, and Pending Home Sales failed to impress. Furthermore, there has been a general softness about the economy and Fed members have gone silent on the Fed Fund Rate matters. It's a reversal from December and expectations for 2010 are dialed back a bit. Mortgages rates are falling, but have likely bottomed out for now.


We are witnessing a stasis. The economic forces of expansion and contraction seem balanced. Data is contradictory and difficult to interpret. Wall Street is unsure of what's next. Mortgage rates should stay in a tight range between now and the Super Bowl. There will be days when rates are down, and days when rates are up. The key is picking the right day to make your rate lock. Be patient, but not too patient. Locking mortgages has always been a game of timing. And for that, you may need some help.


If you don't have a mortgage planner you can call for advice, know that you can always call me. Or, send an email, whichever is easier. I handle all of my own emails and I would be happy to help you lock your mortgage rate.



John Payne is an active mortgage planner. Reach John via email at John@JPMortgageLoans.com or call 510-799-1400 or toll free at 800-259-3424.