Adjustable rate mortgages or ARMs can be a wonderful mortgage tool or they can be downright ugly.

ARMs typically come in flavors such as the 3/1, 5/1, 7/1 or 10/1.  The first number is the number of years that the initial interest rate is fixed.  The second number means that after the initial fixed rate period ends, the interest rate can change once a year.

ARMs have caps, typically 5/2/5.  The first number means that the interest rate can go up 5% in the first adjustment after the fixed rate period.  The second number means that the interest rate can go up a maximum of 2% per year after the initial adjustment.  The third number means that the interest rate can only go as high as 5% over the initial fixed rate.

So, if you have a 5/1 ARM with 5/2/5 caps and an initial fixed rate of 4%, the interest rate could go up to 9% at the very first adjustment after 5 years.  But if the ARM rate only went up to 6% after the first adjustment, the rate could only increase by 2% in the second adjustment to 8%. And the rate could never go above 9%.

ARMs can be a great mortgage tool if you are planning to pay off your mortgage or move within the fixed rate time frame.  Rates on 5/1 ARMs are below 4% at this moment.

If you are not planning to move or pay off your mortgage within the fixed rate time frame, ARMs can pose a big risk.  With the U.S. Government spending money as fast as they can print it, mortgage rates are going to go up in the near future.  And rates are probably going to go up dramatically.  If you are in an adjustable rate mortgage and are not planning to move or pay off the mortgage, it would probably be wise to refinance into a fixed rate mortgage while rates are low.

And now for the ugly.  If you have an Option ARM and have been paying the minimum payment, you probably have a negative amortization loan, meaning that the amount of principle that you owe is increasing every month.  You are either underwater or sinking fast.  Refinance if you can, as soon as you can.  

Posted by Terry Brunner.  Terry is a Senior Loan Officer with Horizon Financial.  Terry can be reached toll free @ (877) 627-9211 x150 or email TBrunner@HorizonFinancial.org.  Visit Horizon’s website at www.horizonfinancial.org

Posted by Terry Brunner.  Terry is a Senior Loan Officer with Horizon  Financial.  Terry can be reached toll free @ (877) 627-9211 x150 or   email TBrunner@HorizonFinancial.org.  Visit Horizon’s website at www.horizonfinancial.org

The reason Fannie Mae has started its Loan Quality Initiative is to improve its loan pool’s performance.    

Better loan quality should help keep conforming mortgage rates down, while reducing the taxpayer’s burden for foreclosures. Unfortunately, it’s also going to lead to more mortgage denials and a lot of busted purchase closings. Therefore, be extra careful with your credit between the date of application and the date of closing. If you must buy something “big”, consider paying cash.  Anything that goes on a card can be used against you as grounds for revoking your approval. Even if your loan is underwritten and ready to close.   

What the bank will do: Look at the Credit Inquiry section of your credit report to look for “non-disclosed liabilities”. If items are found, the bank will ask for supporting documentation on the inquiry, and will use the information to re-underwrite your mortgage.

What you should do about it: Don’t go looking for new credit until after your loan is funded.  Period.  Now re-read the prior sentence, please, to help it sink it.

 For help with your mortgage approval, or questions about the Loan Quality Initiative, let us explain your options in easy terms.

Posted by Bob Dangelo, a senior Loan Officer with over 20 years mortgage lending experience.  You can reach Bob at Horizon Financial (877) 627-9211 ext 110 or email at bdangelo@horizonfinancial.org.

God Bless Our Troops And Veterans!

Posted by Terry Brunner.  Terry is a Senior Loan Officer with Horizon Financial.  Terry can be reached toll free @ (877) 627-9211 x150 or email TBrunner@HorizonFinancial.org.  Visit Horizon’s website at www.horizonfinancial.org

The stock and bond markets of Wall Street are driven by unemotional numbers like profits, P/E ratios, return on investment, etc.  But they are also driven by emotions.

A New York broker once said, “Downtown, there are two emotions: Fear and Greed.  The rest is bull*$x&.”

Greed as in the late 1990’s when investors jumped to buy any stock that ended with a “.com”.  Of course that bubble exploded in 2000.

Fear as in the last week when the debt problems of Greece and Portugal and maybe Spain caught the attention of the investment community.  Will these problems spread to France and Germany?  Will the debt crisis affect the United States?  Are Europe’s biggest banks facing insurmountable strains?  Will the crisis have a negative impact on China’s exports to Europe?  What are the implications for the LIBOR?

The anxiety in the investment community has led both institutional and retail investors to flee the stock market and shift their funds to gold, bonds and money markets.

When money is poured into bonds the price of bonds goes up.  As the price of bonds goes up the yield or interest rate on those bonds goes down.  As a result mortgage rates have fallen dramatically.  The 15 year fixed rate is at its all time low.  And the 30 year fixed rate is close to its all time low.

If you have an adjustable rate mortgage or can benefit by refinancing, this may just be the time to pull the trigger.

Posted by Terry Brunner.  Terry is a Senior Loan Officer with Horizon Financial.  Terry can be reached toll free @ (877) 627-9211 x150 or email TBrunner@HorizonFinancial.org.  Visit Horizon’s website at www.horizonfinancial.org

The Dead Cat Bounce is a Wall Street term that refers to a brief recovery in the price of a declining stock, bond, security or market. The term is derived from the concept that “even a dead cat will bounce if it falls from a great height”. This phenomenon may apply to the mortgage bond market in the near future.

First of all, remember that when bond prices go up, rates go down. When bond prices fall, rates go up.

In the latter half of 2008, 30 year rates moved in a range from 5.875% to 6.5%. 15 year rates moved in a range from 5.75% to 6.125%. That is until November 25th, 2008. On that day the U.S. Federal Reserve Board announced that it would initiate a program to purchase mortgage backed securities from Fannie Mae and Freddie Mac, artificially propping up the prices of bonds and keeping interest rates low. The very next day rates on a 30 year fixed went down to 5.125% and ensuingly headed further south.

Over the last year and four months, the massive purchases (1.25 trillion dollars worth) of mortgage backed securities by the Federal Reserve have kept mortgage bond prices up and interest rates down. The 30 year rate has fluctuated between 4.5% and 5.25%, while the 15 year rate has moved in a range from 4.25% to 4.875%.

Now the bad news. The Federal Reserve has officially stopped buying mortgage backed securities as of March 31st, 2010. Mortgage rates have started to move up. While there may be some short term volatility, some experts expect rates to rise by 1% this year.

If you need to get out of an adjustable rate loan, or would benefit by refinancing, this may be your last chance to do so at a great rate.

And lets hope for the “Dead Cat Bounce” or bounces. Because this cat is officially DEAD!

Posted by Terry Brunner. Terry is a Senior Loan Officer with Horizon
Financial. Terry can be reached toll free @ (877) 627-9211 x150 or
email TBrunner@HorizonFinancial.org. Visit Horizon’s website at www.horizonfinancial.org

In the past year the government has enacted several new rules to protect consumers and stop appraisal coercion by evil bankers and brokers.

HVCC (the appraisal code of conduct) has already forced many experienced and qualified appraisers out of the business.  It has also helped to propel home values lower by allowing Appraisal Management Companies to seek out the cheapest appraiser (inexperienced, out of area appraisers who have no knowledge of the local market) so they can fatten their profits.

The new Good Faith Estimate has certainly helped to confuse more consumers when they try to compare financing charges for purchasing or refinancing a home.

Of course, the lenders and regulatory agencies (Fannie, Freddie, FHA) have helped too by tightening up on their financial requirements to purchase or refinance.

All this consumer assistance hasn’t been totally successful.  Consumers are still slipping through the cracks.

WILY, CUNNING AND DETERMINED CONSUMERS ARE STILL MANAGING TO PURCHASE OR REFINANCE HOMES AT EXTREMELY LOW MORTGAGE RATES!  THIS IS TOTALLY UNACCEPTABLE!

If the government really wants to help consumers, they could force everyone who wants to purchase or refinance a home to take a two month training course so that the consumer clearly understands how the government has helped them.  Consumers should have to pay for this training and a final test.  The training and test money could be used as a much needed income stream for further government housing assistance.

The government could get Homeland Security involved as well.  By requiring all consumers to provide fingerprints and hair follicle samples we might well prevent a covert terrorist cell from purchasing a safe house. And if Homeland Security coordinated with the local DMVs to collect unpaid traffic/parking tickets from consumers attempting to purchase or refinance, another income stream would be generated so that local politicians could go on more Global Warming junkets to exotic places.

Lenders and regulatory agencies could also assist consumers by demanding more skin in the game.  Instead of a 20% down payment, how about a 50% down payment?

I’m confident that, working together, we can force all of the greedy and diabolical loan officers, appraisers, inspectors, real estate attorneys, homeowners insurance agents, etc, out of the financing business once and for all.  We can shut down the housing industry altogether.  All we need is a little more “HELP”.

Posted by Terry Brunner.  Terry is a Senior Loan Officer with Horizon Financial.  Terry can be reached toll free @ (877) 627-9211 x150 or email TBrunner@HorizonFinancial.org.  Visit Horizon’s website at www.horizonfinancial.org

http://forecasts.org/fha.htm

-Gary Schoenholz (864)979-1111.  15+ Years of mortgage experience. Website:  www.GarytheMortgageExpert.com