Archive for the ‘Intero Mortgage’ Category

Borrowers Are Arguing Over The Wrong Thing

By Rick Soukoulis | October 14th, 2011 0 Comments

If you’re around home sales and mortgages for any length of time, you understand how borrowers get very excited over an eighth of point in rate.

Before securitization, there could be a pretty wide difference in rates, and it made sense to shop around. Mortgage rates were a lender-specific phenomenon, and rates could vary pretty noticeably from lender to lender.

Now, there’s pretty much a standard rate that’s determined by FNMA and by the mortgage backed securities market, and the differences between lenders are pretty small.

Still, borrowers will shop.

The internet has, of course, played a big role in this.  A borrower can spend a few minutes at a computer and get rates from 20-30 or more lenders.  The rates won’t vary a huge amount, but it can be very seductive.

If we do the math, though, borrowers are focusing on the wrong thing.  The monthly savings by saving an eighth in rate just don’t amount to much.

Let’s look at a 30 year fixed rate loan for $300,000.  At 4-1/8% the monthly payments will be $1,432.  Now let’s assume the borrower shops all over town, spends hours on the internet, and he finds a lender at 4.0%.  Guess what, his payment drops by only $21!  That’s $252 a year, and even if the borrower stays in the house for eight years, it’s barely $2,000.

It just isn’t all that much and in today’s world where the wrong lender can mean no closing.

Wouldn’t buyers be better off negotiating a lower price of $3,000?  Or a $4,000 credit towards termite repair.

When a Realtor recommends a lender, it’s because he or she knows that lender to be dependable. And closing on time can be a lot more important than saving an eighth of a point in fees.

Rates matter.

But it’s more important for borrowers to have a good Realtor to negotiate the best possible deal.

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Interest rates & Diamonds

By Rick Soukoulis | June 16th, 2009 0 Comments

posted by Rick Soukoulis, Chairman & CEO of The Loan Source

Did rates moving up over the last couple of weeks make your heart stop? Fear not, Uncle Sam is on the job. In fact the current U.S. mortgage market feels a lot like the diamond industry.

How’s that? If you know a little about the diamond industry, you know that DeBeers pretty much sets the prices.

It strikes me as very similar to what our government is doing with interest rates. The government has decided to keep rates low and the fed is doing everything possible to accomplish this. It’s working.

The reason why is pretty apparent. Although the stimulus package will put lots of dollars to work, there’s nothing quite like millions of homeowners having $300-400 extra every month because they refinanced into a lower rate. There’s nothing like these lower payments to help families to pay their bills easier or to have a few extra dollars they can spend. Also, with home affordability at an all time high buyers are back IN THE MARKET.

And there’s nothing like it to stimulate the economy.

The Federal Reserve has been buying hundreds of billions in mortgage backed securities, and they’ve been buying every day of every week.

Like with anything else when someone is buying huge quantities, it drives the price upwards. Higher prices on mortgage securities mean lower interest rates on mortgages.

When you look at the Fed activity, it looks like 4.5-5.5% is the level they’re trying to maintain. Rates bounce around within that general area, but when they get a little too high; the Fed is driving them down. Just as we are seeing now that rates are at 5.5% which is the higher end of the fed’s desired range. Watch for rates to move lower in the coming days.

A big part of why they’re doing this is that the economy is still fragile. It doesn’t feel like we’re in free-fall anymore, but foreclosures are still raging through the land and layoffs are still occurring.

Lenders and the government are working closely together towards the same goal: Keep rates low, knowing that refinances and lower monthly payments will go a long ways to repairing the economy.

If DeBeers can manipulate the price of diamonds, our government, with all sorts of tools at its disposal, can certainly manipulate and move interest rates.

And they absolutely will do so to keep rates down and get the economy moving again.

It’s worked in the past, and I’m positive it will work this time.

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  • Loan Source
    Your one-stop Loan Source – with so many loan options and programs, as well as commitment to excellence in customer satisfaction, we can help you achieve your financial goals.
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Who moved my cheese?

By Rick Soukoulis | April 29th, 2009 0 Comments

posted by Rick Soukoulis, Chairman & CEO of The Loan Source

Who moved my cheese is the title of a great little book that deals with change. If you have you haven’t read it, I highly recommend you get your hands on a copy. It’s a simple story about surviving change and in this market, change is the one constant in the universe.

This article is about a relatively minor issue that seems to have too many people unnecessarily worried.  It’s the issue of new appraisal rules. Yes it is a big change but it is being applied evenly to all.

You may have heard all the scare talk about HVCC and how it’s going to change everything on May 1st.

First, let’s define it. HVCC stands for Home Value Code of Conduct.  It does not, as I heard one person say, have anything to do with Heating, Ventilation, and Air Conditioning. That’s HVAC, something totally different.

At its heart, it addresses the issue of loan originators, both at banks and brokerages pressuring appraisers to increase the value of a given home.  And I think we all know that there have been abuses in this area.

Certain loan originators would select appraisers they knew they could pressure, and sometimes even threaten appraisers that they’d never give them business again unless they came up with a higher value.

The solution is that loan officers will no longer be able to select the appraisers they want to work with.  There will be a pool of appraisers at an AMC (Appraisal Management Company), and when they place an order, the AMC will randomly assign them an appraiser. This holds true for ALL banks, mortgage banks and mortgage brokers. In essence the collateral for the loan will be evaluated independently of the borrower ability to repay, sounds logical.

How will Realtors be affected?  The answer is, virtually not at all.

Realtors are not barred at all from talking to appraisers.  In fact, Realtors always have been and always will be very critical to the appraisal process.

Many Realtors know a neighborhood better than most appraisers, and they will continue to provide appraisers with different comps to consider, information on neighborhood changes, listings, and other types of information that are so important in helping an appraiser do his job.

How loan officers select appraisers has changed, but Realtors will still be able to work with these appraisers.

In fact, Realtors will not only be able to, but will still be needed, to help produce the best possible appraisal and maintain the integrity and accuracy of appraisals.

This is not to say that over the next few months while the industry digest this change there won’t be problem, there will… but in the end it will be business as usual.

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The Return of the Mortgage Banker

By Rick Soukoulis | April 9th, 2009 0 Comments

posted by Rick Soukoulis, Chairman & CEO of The LoanSource

After several decades in the mortgage industry, there is very little that gets me excited. I’ve learned that staying calm can often be the most effective way to handle things.

Having said that, there is one thing that does have me excited. What is it? It’s the return of the mortgage banker as the best source of good loans for borrowers. Note that I didn’t say banks. And I didn’t say mortgage brokers. I said it was the mortgage bankers who are staged to make a big difference for the American homeowner.

First, let’s define our terms – A mortgage broker cannot fund loans. He is dependent on so-called mortgage wholesalers, and hardly a day goes by where another wholesaler reduces the number of brokers they will do business with. These decisions to reduce suppliers (which are what a broker is) are being made based on the quality and volume of the loans produced by that brokerage firm.

Over the past 10 years brokers maintained a long list of lenders that the broker could leverage off each other without much regard. If a broker was approved with 100 lenders but only did 10 loans a month you can see that the relationship was good for the broker (lots of suppliers) but not so good for the lenders (fighting over limited volume from each small broker).

Long gone are the days when a broker could legitimately say he was approved by dozens and dozens of lenders and that he could shop the loan among them. Not so any more. This is making it very difficult for the Mom and Pop brokerage to compete. Most small mortgage brokers firms are down to a handful of wholesalers they can do business with. As for the banks, they are just not lending much outside of FNMA/FHLMC conforming limits. We read about that almost every day.

So where does the mortgage banker come in? What exactly is a mortgage banker? First, a mortgage banking company is one that funds its own loans. More importantly, it has historically been the link between institutional investors and mortgage borrowers.

Historically, mortgage bankers would line up relationships with out-of-state banks, S&Ls, insurance companies, and larger pension funds. They would find out what yield requirements these investors wanted. Then, they would try to come up with mortgage programs that would deliver that yield while still being attractive to borrowers.

Quite often, these investors were in areas where there was little growth and even less demand for mortgages. They had money to invest, but not enough borrowers. The California mortgage banker was able to help them meet their needs.

It might be yield, but it could also be other loan attributes such as loan size (some investors like jumbo loans) or maturities (some investors like loans that start adjusting after three years). The mortgage banker would enter into a formal, legal agreement called a “Forward Commitment”. It would spell out the types if loans he would sell to the institutional investor and would commit the investor to buying a set amount of these loans over a one year period. These commitments could be for $50 million or $150 million. The main thing is that they guaranteed that these programs would be available.

The mortgage banker was typically very smart about identifying these institutions and very sophisticated about formulating programs that met the institutions needs while still being attractive to borrowers. He had to be smart about all this because he was using his own balance sheet to fund the loans. He was, in fact, assuming true liability.

What excites me is that this model, which had been quiescent the past several years, is going to come back. I’m certain of this. Mortgage bankers will return to their roots, grow bigger retail divisions, and probably push out the smaller and now less agile mortgage broker. This will leave us with big brokerage shops, mortgage bankers, and banks, all competing for the same customer but all with very different loan product and service offerings. Gone are the days where a company can say that they have all the products in the market. For those of you that were in the business in the 80’s and 90’s this may sound like a return to the past. Well it is.

We’re going back to a time when the mortgage banker has exclusive relationships with large out-of-the area institutions.

  • He’ll meet the needs of his investors.
  • He’ll meet the needs of his community.
  • He’ll have programs no one else will have.
  • He’ll be providing more alternatives for his borrowers than they currently have.

It’s hard work, but this is what mortgage bankers have traditionally done. And it thrills me that we’re headed back in that direction.

Our company has recently entered into on such agreement and now is Funding it’s own jumbo Arm’s and Fixed rate products. This product can only be obtained directly from the LoanSource and will not be offered on a wholesale basis. We are provided for a product for the high end where the liquidity crisis is still impacting real estate sale. This new product provides for loan amounts as high as 2 million and loan to values as high as 80. Talk to one of our loan officers for details.

These are exciting times!

See Also

  • The LoanSource
    Your one-stop Loan Source – with so many loan options and programs, as well as commitment to excellence in customer satisfaction, we can help you achieve your financial goals.
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