Juicy Estates: Mortgage Blog
Loans and Luxury Homes
Mortgage Rates and Updates
South Florida's Luxury Homes
The answer to this question involves the mechanics of both the agency MBS (mortgage backed securities) market and the private MBS market. If you are thinking to yourself “wow that sounds completely uninteresting” you’d be right unless that is you are a mortgage head or finance geek. That small portion of the population (of which I am a proud member) aside, I think you will find this brief and not entirely comprehensive explanation useful in understanding and thus being able to explain to your buyers why the world has inverted itself. Being able to concisely explain this phenomenon to your, clients and co-workers will either garner you increased respect or get you invited to parties, either way you win.
We have all heard of QE, versions 1, 2 and 3. If you had forgotten this is the program in which the federal government is purchasing Fannie / Freddie mortgage bonds (agency MBS) among other things. Recently the federal government started to curtail the amount of bonds it was purchasing each month which of course means lower demand. As demand for these bonds goes down so does the price, as the price does down the yield the bond pays goes up and interest rates are a function of that yield. Simultaneously the demand for privately securitized mortgage bonds has gone up. The reason that the demand for non-agency MBS has gone up (and thus jumbo rates have gone down) is due to the fact that these loans will perform better than any other time in history given that we are in an increasing property value environment, the loans in those bonds are being originated and documented with larger down payments and more thorough vetting of the borrowers. So in a nutshell greater demand for non-agency MBS and decreased demand for agency MBS is why we are currently offering jumbo mortgage interest rates that are as much as .25% below conforming interest rates.
The highest compliment I can receive is a referral. As a senior loan office and producing manager of the most aggressive residential mortgage lender in the South Florida market I look forward to working with you and your clients. Feel free to call or write anytime.
James R. Venney
305.389.5061 – Jvenney@BankUnited.com
“What?!? 100% financing home loans, did we learn nothing from the mortgage crisis?”. These were the words one of my new clients as I explained to them what their options were regarding the amount of down payment required to purchase a new home. Some of you will become giddy with excitement at the idea of 100% financing for home purchase while others will be offended and dismayed. So before the barrage comments, emails and phone calls allow me to explain. This particular client owns their current home free and clear, will retain ownership that home. By accessing the equity in their current home we can provide 100% financing on their new home by “cross collateralizing”. In short 100% financing without additional collateral in the form of other real estate is not currently available. The one universally accepted thing that we as a society learned in the last mortgage crisis is that equity is the only true mitigant to default risk. In English that means if there is equity in the property the home owner will either find a way to pay the mortgage or will sell before the loan goes into default.
So what are current down payment requirements you ask. I think many of you will pleasantly surprised at the answer.
Conforming loans: As many of you are already aware conventional financing (loan amounts below $417,000) is available in the South Florida market with as little as 5% down and FHA with 3.5% down. We, at BankUnited are current offering conventional financing with less than 20% down without mortgage insurance. This is a great tool as the primary objection to FHA financing is that it is punitive in that it carries both upfront mortgage insurance and monthly mortgage insurance both of which raise the buyers costs and monthly payment significantly.
Jumbo loans: One of our most popular loan programs requires only a 10% down payment with loan amounts up to $2 million with no mortgage insurance. This program is designed to help emerging professionals who generate good incomes but have not had the time to accumulate significant liquid assets. Our standard jumbo programs are among the most aggressive in the market and typically require only 20% down to a loan amount of $1 million, 25% down for loan amounts from $1 million to 2 million, 30% down for loans from $2 million to $2.5 million and 35% down beyond the $2.5 million dollar mark. As a portfolio lender these down payment requirements are not set in stone and we can lower amount needed to put down in a variety of ways.
Foreign national loans: One of the benefits of being with BankUnited is that they are historically one of the largest foreign national lenders in the South Florida market. As a result we offer single family home financing for foreign nationals with a 30% down payment to a loan amount of $2 million, condominium financing with a 35% down payment to a loan amount of $2 million and case by case for loans over the $2 million dollar mark.
The highest compliment I can receive is a referral. As a senior loan officer and producing manager for the most aggressive residential lender in the South Florida market I look forward to working with you and your clients. Feel free to call or write at anytime.
James R. Venney
305.389.5061 – JVenney@BankUnited.com
As with every regulatory change that affects the residential mortgage market there is a lot of misinformation and unfounded fear circulating in the Realtor and home owner communities. Sometimes referred to as QRM the QM rules go into effect today and without boring you with the mind numbing details of the sometimes strange and seemingly punitive rules there are just a few facts that you need to know.
1) QM rules have to be followed for those loans being sold to one of the GSE’s. To translate that into English it means jumbo loans and non-conforming loans are not directly affected. Only those loans being sold to Fannie Mae, Freddie Mac, etc (conforming mortgages). must comply with all aspects of the QM rules.
2) Conforming loans will be available with less than a 20% down payment
3) A maximum debt to income ratio of 43% is being implemented for conforming loans
4) It will be more difficult for some to qualify for conforming mortgages however many low interest rate alternatives remain.
The good news is that there is a greater availability of mortgage money today than at any time in the past 6 years. For example, 10% down jumbo loans up to $2 million, foreign national loans for condominiums and single family homes with rates in the 4% range and 30 year fixed rate jumbo loans in the 4% range.
If you have any questions about QM rules or the availability of mortgages in the South Florida market don’t hesitate to give me a call, 305.389.5061.
For more than a year I have been trying to communicate that the unemployment rate is not the only direct indicator of the soundness of the economic recovery. If fact many of the jobs that were lost in the financial crisis of 2008 are not coming back as companies have learned how to do more with less by utilizing new technologies and creating greater organizational efficiency. That does not mean that the jobs were shipped overseas. While some jobs were in the fact shipped over seas we can not ignore the new reality and the fact that manufacturing in places like China is on a downward trajectory given the increase costs due to demands by workers in that country.
My colleague Michael Schnabel of EWM Realtors who has an extensive background in the financial markets was kind enough to bring this article to my attention “Heading Toward A Cliff” in which the author Barry Ritholtz drafts the single most succinct line on the topic that I have been exposed to. Barry write “ the linkage between monetary policy and employment is very weak in the era of globalization.” There in lies the rub my friends. Globalization changes everything and we need to go back and reexamine the old conventions regarding economic policy and their effect on the economic future….this is not your grandfathers economy.
Mortgage interest rates for the South Florida market dropped below 4.25% again for 30 year fixed rate conforming mortgages. Conforming mortgages are those offered via Fannie Mae and Freddie Mac with loans amounts below $417,000. For a comprehensive survey of rates on all available mortgage loan programs for Miami and surrounding areas send me a quick email at James@ECFLion.com
As I wrote in my blog of June 10th “ Victory Over The Dred 4506” this seemingly innocuous IRS form has caused many home buyers and home owners’ in the South Florida real estate market great pain and in some instances has delayed or even prevented closings. Well to add to the drama when congress couldn’t get out of its own way and the government was shut down the IRS stopped processing the 4506 requests. This as it turns out was actually good news. The fact that the IRS was not processing the 4506 requests essentially forced lenders to close without receiving successful results which sets a precedent.
While we fully expect lenders to return to their former stance of requiring all domestic borrowers to sign a 4506 and that it be successfully executed prior to closing there is a little wiggle room now that may help us continue to accommodate those borrowers with extenuating circumstances.
As of today if you are a W2’d employee the successful execution of a 4506 is not required for those of you that are “self-employed” it is required but the good news is the back-log of request with the IRS is only a couple of weeks.
We are declaring VICTORY over the dread 4506! For those of you that are not familiar form 4506 and/or the form 4506T is a request for tax returns or tax transcripts that mortgage lenders require from potential borrowers to confirm that the copy of tax returns that they provide are the same as those on file with the IRS. Sounds simple enough however by some estimates as many as 300,000 Floridians have recently had false tax returns filed under their names. This causes big problems when applying for a mortgages as the lender can not close the loan until they can successfully exercise a form 4506 or 4506T via a third party provider. Many home buyers and home owners have experienced significant delays in their closings when it is discovered that they can not successfully fulfill this underwriting requirement.
We are please to be able to announce that we have developed a full proof way to address this issue when it arises and have now successfully completed more than 15 transactions in the past 60 days for buyers and borrowers that were victims of tax identity theft and were told by other lenders that they could not close. Elements Capital Funding is regularly closing purchases transactions in 15 business days and refinance transactions within 20 business days. The identification of fraudulent tax return filing, if discovered within the first week of application will only extend these time frames by 5 to 7 business days.
“This proprietary process is being utilized to complete sales and refinances in a timely manner despite the fact that FNMA has not addressed the issue directly”.
If you or your client is experiencing the pain of not being able to close as a result of having their income tax identity stolen give us a call and we will move quickly to get the issue resolved.
We enjoy the luxury of doing primarily purchase transactions and therefore rarely have appraisal issues with our files. That being said we do secure some of the lowest interest rates in the market and therefore do entertain a significant amount of refinance requests. It is always amusing (and simultaneously alarming) that appraisals performed on refinance requests are almost universally more conservative than those performed during a purchase transaction. So the question is, why?
The answer to that question is, in my opinion based more on psychological factors than on accepted appraisal practice. When a property has been listed on the MLS, given adequate market exposure and two willing parties have entered into a binding contract under the guidance of one or more professional Realtors the appraisal of said property tends to be more accurate and thorough. I imagine that this is due on large part to the fact that the appraiser is giving credence to, either intentionally or unintentionally to the weight of the contract and opinions of market value communicated by the other professionals in the transaction. Of course in a refinance transaction the only opinion of market value communicated the appraiser is that of the home owner.
So what happens in a refinance when the home owner is a 20 + year veteran of the real estate industry and regarded as one of the most competent real estate professionals in South Florida? You can only imagine! I will spare you the mind numbing details but let us just say that there were 3 appraisers and only one relatively accurate estimate of market value. Appraiser #1 couldn’t even finish the report and evidently won his appraisal certification at a raffle because he clearly had no experience. Appraiser #2 missed the market value by almost 30% by using comparables located in a warehouse district from outside the subject’s area. Appraiser #3 used the most relevant comparables and produced an accurate and well written report that is supported by the market data.
I make these comments not as a participant in the refinance transaction but as someone who voluntarily forfeited his appraisal certification in 2010 after 20 year as a certified appraiser (12 of those as a full time appraiser in the South Florida market). I forfeited my certification for a few reasons. The first and foremost is so that I could express an opinion about the quality and/or accuracy of an appraisal, speak to my clients about it and keep a watchful eye on appraisers without violating any provisions of USPAP (Uniform Standards of Appraisal Practice). The secondary reason is perhaps more interesting to most. I left the industry after a successful career when I witnessed the advent of appraisal management companies. In short appraisal management companies have had the effect of commoditizing the appraisal industry. As a result of this commoditization the quality of the appraisal reports is lower and the persons completing those reports typically less experienced with less appraisal education. The most seasoned appraisers in the market typically will not complete appraisal reports for the largest appraisal management companies as these companies pay a fraction of the appraisal fee to the appraiser.
In my opinion a well-trained residential appraiser can complete 5-7 reports a week when doing so in compliance with USPAP and giving each subject property the consideration it deserves. Given that appraisal management companies are only passing along $125 – $200 per report to the appraiser…well you can do the math.
In the end the best defense against a low-ball appraisal is data. Having accurate, relevant market data that is not distorted by emotional bias is the only way to get an under paid appraiser to see the light.
If you are having appraisal headaches give me a call and we will see what we can do to get you some relief.
Several times per week I get that frantic call from a South Florida home buyer or home owner asking, “how fast can I close?” In the wake of the sub-prime mortgage mess the federal government has put into place mandatory disclosure time lines in an effort to protect consumers. These time lines must be adhered to and in some instances can cause delays. In short, given the current regulatory compliance environment I have outlined the current turn times we are delivering at Elements Capital Funding and LuxLev Capital for the relevant loan products and transaction type.
Conforming ~ 15 to 20 business days
Jumbo ~ 15 to 20 business days (faster by exception when circumstances warrent)
Private / Hard Money ~ 7 to 10 business days (commercial property only)
Conforming ~ 20 to 25 business days
Jumbo ~ 20 to 25 business days (faster by exception when circumstances warrent)
Private / Hard Money ~ 7 to 10 business days (commercial property only)
The turn times indicated above in large part are predicated on a borrower that provides requested documentation in a timely manner. Working with a seasoned mortgage broker that can provide you with a comprehensive list of the documents that will be required for your loan approval will go along way to helping expedite matters.
If you have questions regarding how to obtain the best rates and terms on your mortgage feel free to call me directly, 305.389.5061.
Current conforming 30 year fixed rates ended the day at 3.5% (3.528 APR) assuming a 720 credit score and 10% down payment. Jumbo Rates continue to improve with 30 year fixed rates with no points standing at 3.875% (3.89 APR) which again assumes a 720 credit score and 20% down payment.