The Current Mortgage Market and FHA
I was forwarded the following email from the CEO of Summit Mortgage this morning and wanted to comment on Brian Chappelle’s comments about the mortgage market. Currently, we have seen an influx of FHA mortgages due to the ever-changing mortgage industry. With most of the trouble due to liquidity from banks as I see it behind us. The shift has been to FHA mortgages for those who don’t have large down payments quite simply due to the strength in the rates. Just yesterday I read that the average 30 year fixed rate was 6.59% with a .56 discount point. While at the same time I can tell you that FHA rates would be lower then that by say .25% and you wouldn’t have a discount point at all. Now if you are buying or refinancing a $200,000 home that .56 equates to $1,120 of loan costs. Not only would you get a lower payment with FHA, but you would also have saved over $1,100 in costs for the loan.
Now, not always is an FHA the best loan for us as consumers. It can depend on many things including your ability to verify your income, your past credit history, and other facets.
What I agree with is that the FHA mortgages have gone up in volume. If I was doing 3 out of every 10 before. I am doing 8-9 out of 10 right now. There is also a Housing Finance Mortgage that we are authorized by the state to offer. That makes us one of thirteen lenders in Colorado who can offer this loan for you.
Whether you are buying or refinancing, the odds are we are going to make sure you get personalized care to ensure the most competitive terms at the time you close your home loan. We will make sure to talk you through your goals as well to make sure the loan is a right fit for you long-term. It does get expensive if you get the wrong loan and have to refinance 12-24 months down the road because of bad advice. Make sure to email meabout your situation and let’s see how we can plan your mortgage health.~Ray
“The Current Mortgage Market and FHA
By Brian Chappelle, with the Washington, DC consulting firm Potomac Partners
As everyone knows, there has been unprecedented turmoil in the mortgage markets since late July. Investors have lost all confidence in the performance of the private mortgage backed securities market for all alt-A and subprime products.
Stated another way, there is no liquidity for mortgage products that comprised 40% of the market in 2006. What does the current market turmoil mean for the future? This shift from alt-A and subprime products is not temporary.
Federal and state regulators have significantly tightened underwriting standards for alt-A and subprime loans. The net effect is that the regulators are institutionalizing (in effect making permanent) the tightening implemented by investors.
Now more than ever, the importance of Federal Housing Administration (FHA) and Veterans Administration (VA) lending is heightened. FHA business has already doubled from last September to this September.
With the likely implementation of the FHA modernization legislation including higher mortgage limits (i.e., raising the “floor” to $271,050 and the “ceiling” to $417,000) and lower cash investment (i.e. 1.5% instead of 3%), FHA volume could increase another 200-300 percent in the next year. “