How LIBOR Will Affect Your ARM

LIBOR (London InterBank Offered Rate) is an index set by a group of London based banks, and sometimes is used to determine the rate for U.S. adjustable rate mortgages.  In 4 years, LIBOR will be going away.  So what does that have to do with you?  Well nothing, UNLESS you have an adjustable rate mortgage.  When this changes it will create uncertainty for a borrower who can’t figure out what the rate is going to be. 

Some LIBOR loans have interest rates that adjust monthly, and others adjust much less frequently. Both principal and interest (P&I) and interest-only (IO) mortgages can be based on the LIBOR.  If you are not sure if your loan is tied to LIBOR take a look at the note you signed.  There is also an ARM disclosure that would say what the index and the margin were.

So what do we know?  That this brings about uncertainty.  When LIBOR goes away, the servicers can set the rate to any index they wish.  They will have to notify the borrower prior to the change date, but by then short and long term rates could have skyrocketed.  With both fixed and adjustable rates are still low, it may be the right time to review your mortgage with a professional.  

If you have any questions, please let me know.  I would more than happy to discuss your specific situation and address your personal questions.

Chris

FHA MIP Reduction Suspended on Inauguration Day

Today, Donald Trump took the oath of office and now has become the 45th President of the United States.   There is no doubt that his administration will be bringing about change, good or bad, there will be change.  The day is not yet over and we have already begun to see a change affecting the mortgage industry, specifically FHA buyers.  January 9th the FHA announced a reduction in the annual mortgage insurance premium rates (MIP) and there was much buzz and excitement at the potential savings to a borrower.

As of today, it has been indefinitely suspended. (It was set to take affect on January 27th).

As we go through this changing year, rest assured Cornerstone Mortgage and myself will be on top of anything that will affect our clients.  Please don’t hesitate to reach out to me with any questions.

Great News for FHA Borrowers

FHA Loans Just Became More Affordable

In a statement today, the Department of Housing and Urban Development announced that the annual mortgage insurance premium on FHA loans will drop by 25 basis points which is equal to .25% savings to any FHA borrower.  This will help ease the effect of the rising interest rates and give a little more buying power or more room in the monthly housing expense.  (The cut applies to new mortgages with a closing or disbursement date on or after Jan. 27, 2017).


“Dropping mortgage insurance premiums today will mean a whole lot more responsible borrowers are suddenly eligible to purchase a home through FHA,” William Brown, president of the National Association of Realtors, said in a statement.

The FHA said that it projects that its new premium rates will save new FHA-insured homeowners an average of $500 in 2017 alone.

So what is an FHA Loan anyways?

An FHA loan is a mortgage insured by the Federal Housing Administration. Borrowers with FHA loans pay for mortgage insurance through a Mortgage Insurance Premium (MIP), a self-sufficient insurance fund that protects the lender from a loss if the borrower defaults on the loan.  FHA loans are attractive to buyers because they require a low down payment, lower rates and more flexible guidelines.  

Please reach out to me for more information on current FHA Home Loan Rates or to find a loan program that is right for you.

Sincerely,

Chris

Mortgage interest deduction on the chopping block: My Thoughts

Watch this MSN report: "Heads up, homeowners: Mortgage interest deduction on Trump's chopping block" and see my thoughts below:

The concept of mortgage interest deduction sounds sexy, the harsh reality is that you are paying $1 to save 33 cents. That is a net loss of 67 cents. Granted you get the value of a roof over your head, but that simply minimizes the cost of the roof over your head. Keep in mind as the report mentions, there is a small percentage of people that get to take advantage of the mortgage interest deduction. For people who need more money in their pocket the most (a greater percentage of the population) this will have no change to their tax return. I say, let’s get rid of it!

Rising Mortgage Rates: Why Buyers Should Get Off the Fence

I know it seems like all our messaging right now is about rising interest rates.  For the past 8 years we have been warning of this day and most people felt like we were crying wolf.  Well the Big Bad Wolf is here now and he is showing his gnarly teeth.  Rates have gone up and the trend is not your friend.  On the good side, in December of 2015 we were at 4.25%.  As of today we are less than that.  The bad news is that we will see 4.5% in 2017.  The question is will it be in January or some other month.  If you have been a fence sitter it is now time to get off the fence.

  Don't just take it from me, read more: Do Rising Mortgage Rates Mean Buyers Should Wait or Lock?

Trump Wins! You the consumer of mortgages LOSE!

Yes, today there will be a quick drop in rates as the Dow panics and there is a flight to safety.  However in the weeks and months following you will see long term rates go up by .50 to 1.0% as mortgage backed securities and other bonds go out of favor with investors.  Trump has made it clear he is going to get this country's financial house in order and to do that, we need to make interest on the money we borrow and borrow less.  Long term (decades) this could be good for you as a citizen of the United States.  Short term (next 8 years) we will see rates go up and the cost of borrowing for your home will be more expensive.

My advice, if you are thinking about refinancing LOCK TODAY!  If you are thinking about buying in the near future move your timeline up. Rates will be higher in 3-6 months and you will not be able to afford as much.

Please contact me: http://www.cornerstonemortgage.com/ChrisScheer/

Is The Next Housing Crash Coming?

This is a fantastic article if you are a person who believes in trends!  As I read it, we are currently in phase II but depending upon the market next spring we could easily move into phase III.  Not only do we have the potential for hyper supply; look around you, do you see a lot of new construction?  We are also almost assured of rising interest rates.  Those are 2 of the 3 signs with a recession being the 3^rd sign.  Any significant event on the global stage could trigger the recession which would put us right back where we were in 2008.  Maybe not as drastic, but far too many homeowners are 1 paycheck away from a missed mortgage payment.

As I have the opportunity to look at borrower's balance sheets and assets regularly, there simply is NOT enough saving happening.  Too many people are trying to live the life of a wealthy person or if not wealthy, at least the life of someone they see on television.  Those that stop trying to keep up with the Joneses and live frugally will be prepared for when the next housing crash comes.

-Chris

SaveSave

Do Election Years Affect Mortgage Rates?

Wherever you look, you can find opinions on both sides.  Some say an election year has no direct bearing on interest rates while others say it most certainly does.  There is evidence to back both views.  One thing that is for certain: given that this election is unlike any other election, all bets are off.

Neither candidate has intensely focused on the issue of housing so there does not appear to be a direct policy that will largely impact the industry.  But as humans we have a fear of the unknown.  So yes, during an election year buyers tend to be uneasy.  Markets & stocks do not like uncertainty either. This could, in turn, affect job creation, unemployment and the overall strength or weakness of the economy.  That of course, trickles right down to housing.

Right now Wall Street is leaning toward Hillary Clinton being elected and the market is priced as such.  If she does become president, yes there may be a slight increase in rates but Wall Street likes someone who is not likely to make radical changes.  If Trump is elected, it will be like going back to July 3rd when we saw the effects of BREXIT, which largely affected consumer and manufacturer confidence.  

Whatever will happen we will be looking at a 4-yr cycle until the next election.  So I wouldn’t hinge my decision on an election, I would hinge it on the needs of your family and your pocketbook.  One thing I can say, in looking back at rate trends we will still most likely still be enjoying the lowest rates in history.  Just look back at 1981 where the ANNUAL AVG was 16.63% (SEE HISTORY BY YEAR AT http://www.freddiemac.com/pmms/pmms30.htm)

Mortgage Mistakes

I came across a good article today:  5 Newbie Mortgage Mistakes (and How Much Each Could Cost You)

In the article they touch on two mistakes I would like to comment on, "Falling for Marketing Gimmicks" and "Not Knowing How to Eyeball the Paperwork."

The article discusses getting a Loan Estimate (LE) from a lender before choosing them. However, the lender will not issue a LE unless the borrower makes formal application and that includes having a property address.  You will not get a LE when you are looking to get pre-approved.  However, in most cases the mortgage company will provide a closing cost worksheet to give the borrower an idea of anticipated expenses.  

Do not make your decision off of the closing cost worksheet.  The lender is not held to those fees and often unscrupulous lenders will have more fees on the LE than they did on the closing cost worksheet. 

-Chris

Weighing In On Brexit: A Loan Officer's Perspective

Thursday's historical 'Brexit' ("British exit", which refers to the June 23, 2016 referendum by British voters to exit the European Union) vote has caused panic and uncertainty in the financial markets.  Whenever something like this happens there is an immediate flight to safety.  That means that large institutional investors move their money out of stocks and buy bonds.  When bonds are in demand, their price goes up and thus their yield or effective interest rate goes down.  This is why we saw rates fall between .125-.25% on Friday, June 24th, 2016.

The challenge with the rates falling is that they are near historical lows.  Realistically they don’t have much room to go lower.  The large institutional investors will get to a point where a return less than 3.5% is just not worth tying their money up and they will look for either higher returns or short term places they can wait for the market to determine when the uncertainty is over.

We have had a sellers’ market all year long with a large amount of buyers, small housing inventories and low interest rates.  That being said, the changes made to the mortgage underwriting process after the mortgage crash of 2008 has placed a significant amount of weight on accurate appraisal values.  Even with competing offers, buyers offering over list price and houses selling the first day of listing (or even before), the scrutiny in which appraisals are facing will control any potential bubble.  

Over the past 90 days I have seen 5-10% of the purchase transactions where the appraised value has been lower than the sales price.  This forces either the seller to lower their price or the buyer to pay the difference.  In both cases the mortgage industry and the country are protected from a perceived “bubble.”  The lender is lending off of the appraised value or the sales price, whichever is lower.  Thus they are certain that their risk is appropriate for the loan program that the buyer has chosen.  If there is one lesson that the industry learned in 2008 it was that collateral appropriately valued is key.  The industry is continuing to hang their hat on that and we will not see the overvaluations that occurred prior to 2008.

One thing to keep in mind though, is that if you purchased your home between January of 2013 and March of 2016 there is a good chance that your interest rate may be higher than the market and with the increase in home valuations that has occurred your equity position may have changed enough to warrant a mortgage fitness checkup.  I highly recommend that you reach out to your preferred loan officer and discuss your situation with them.  

Please feel free to contact me with questions or for a mortgage fitness checkup.

-Chris Scheer

Same Loan Costs, More Choices-We Are Defying the Odds

The implementation of TRID has had a significant impact on all lenders. In fact, a *recent article by Mortgage Daily reported that banks have actually eliminated product offerings due to TRID. They went on to say that the 2016 ABA TRID Survey found that some banks have specifically eliminated construction loans, adjustable-rate mortgages, home equity loans and payment-frequency options. But how have the changes affected consumers?

ABA's executive vice president, Bob Davis, said: "Consumers are seeing the greatest impact due to increased loan costs, fewer choices and delayed closings--and that's not what this rule was intended to do."  I couldn't agree more, and am grateful that I work for such a great company, who, from the beginning made it their mission to get through this transition as smoothly as possible.  Let's take a look at how Cornerstone Mortgage is defying this statement:

• Increased Loan Costs -  Yes, it is true, MBA estimates that each loan costs an additional **$160 due to TRID implementation.  However, Cornerstone has not increased any of it's fees to our customers. 

• Fewer Choices -  Cornerstone not only continues to offer the same programs, but we have also added a one-time close construction program, in which we can lend more than 80% of the cost of the loan.  

          This new program allows our customers to:

-Lock-in their rate early in the transaction and avoid extended lock fees.

-Pay closing costs once.

-Save money! 

• Delayed Closings -  We have added 3 employees just for the specific purpose of working the disclosure desk and we have added 4 people to the closing department.  So, we have the ability to close loans as needed when the borrower is prepared.  What does that mean?  If you are even thinking of looking for a home, get pre-approved.  This way we can make sure that we have all of the documents we need for a "clean deal."  That way, when you find the right home, you can jump on it! 

*Source:   "Banks Cut Programs Due to TRID
**Source:  TRID Cost Per Loan Reference

Remodeling: Cost vs. Value

Happy New Year!

If your goal this year includes home improvement or renovations you will definitely want to ask yourself: "When the dust settles, what are the benefits of a home improvement project?" This question is answered by the 2015 Remodeling Impact Report found in Realtor Magazine.

The report has 3 major sections: return on investment, the joy the remodel brings to a homeowner, and what has the highest buyer appeal (though not necessarily the highest return on investment).

Their findings:

#1 Interior Return On Investment (105%) = New Roof

#1 Project that made owners the happiest = Bathroom Remodel

#1 Highest buyer appeal (but not the highest percentage of ROI) = Kitchen Upgrade

The overall winner? When you look at the intersection of buyer appeal, cost, return, and owner joy, a new roof appears to be the smartest remodeling investment. 

Here is an illustration of their findings:

And your best bet is to speak to a realtor in YOUR AREA who knows the local market and can give you even more detailed advice on what will be a good return on your investment.

If you have questions on how I can help you achieve your goals, please feel free to contact me anytime.

Sincerely,

Chris 

Your Residential Lending Team

The #2 Largest Lender in the St. Louis Region

Cornerstone Mortgage is working it's way to the top.

There are two things I know to be true:

1. You don't get to the top without focusing on customer service
2. You won't do well with customer service if you don't love your company   

 Just like the Simon Sinek said, "Customers will never love a company until the employees love it first."  

I don't think it is a coincidence that our clients have a 96% satisfaction rate while our company has also been named a Top Work Place four years in a row.  As a collective family of professionals, Cornerstone has originated over $1 billion in closed loans AND advanced to the #2 Largest Lender in the St. Louis Region.   Happy employees = high customer service = happy clients.  An endless cycle of satisfaction.  I will toast to that at the New Year.

-Chris

Fed Announces Interest Rate Increase, Now What?

You may have heard the Federal Reserve raised its key interest rate on Wednesday, December 16, 2015 by .25% (from a range of 0% to 0.25% to a range of 0.25% to 0.5%). This is the first increase in nearly a decade. So how does this affect mortgage rates?

This increase doesn’t mean that the average rate on a 30-year fixed mortgage will increase by a quarter of a point. That’s not how fixed mortgage rates work.

An article on CNBC explained it perfectly:

“The Fed has little influence over long-term, fixed-mortgage rates, which are pegged to yields on U.S. Treasury notes, so don't expect higher mortgage rates to weigh on your ability to buy a home or refinance in the near future.” (One thing to keep in mind, however, is the fact that this hike could affect adjustable rate mortgages. Contact us today to see if it is the right time for you to refinance to a fixed lower rate).

CNBC had another great article “Why the Fed Move Doesn’t Matter to Mortgage Rates” if you have time check it out: http://www.cnbc.com/2015/12/16/why-the-fed-move-doesnt-matter-to-mortgage-rates.html

One important thing you must know is that mortgage rates ARE anticipated to rise to 5.5% by the year-end 2016. This can really affect your buying power. Higher rates = less purchasing power. A 1% increase in rates can equal 12% less buying power.

You may be wondering if this projected increase will affect home prices. In a Forbes article published last year, they outlined whether mortgage rate increases affected home prices, here is what they said:

“Mortgage rates only rise when people feel good about buying houses: inflation is pushing up home prices, and more people have jobs. The higher demand for housing pushes home prices up despite the higher mortgage rates.” (See more at: http://www.forbes.com/sites/billconerly/2012/12/18/when-mortgage-rates-rise-will-home-prices-fall/). 

This is good news if your focus is equity in your home (whether it be to sell or refinance). If your focus is buying a home, consider the fact that rates are expected to go up by the end of 2016. Use us as a resource for any of your questions, we are here for you.

Enjoy your weekend,

Chris

St. Louis Will Be the Nation's Second Hottest Real Estate Market in 2016

According to Realtor.com via the **River Front Times, the St. Louis metro area will be the nation's second hottest real estate market in 2016. "Next year looks to be the best year St. Louis has had in quite some time," says Jonathan Smoke, chief economist for Realtor.com. "We've been seeing strong demand in St. Louis, and if anything, it's starting to heat up even more."

Wow, this has a lot of implications! The good news is this could potentially mean that your current home value could go up, making it a perfect time to sell or perhaps refinance. And if you are in the market for a new home in the St. Louis metro area, start the process early. 

 
"If you're planning to buy next year, start early," Jonathan Smoke, chief economist for Realtor.com, cautions. "There's more inventory on the market relative to the people who want to buy in January and February compared to May, June and July. That tilts the demand in your favor."

What an exciting time for our community, but it could be costly if you wait too late in the year to purchase and prices have increased.

http://Good goo.gl/kg53Gc or goo.gl/dxbsoV VIP Code: 314-223-9824

Get up-to-date listings and notifications through our complimentary home search tool.  (Find the Home Scouting app on iTunes: goo.gl/dxbsoV  or Google Play: http://Good goo.gl/kg53Gc .  Just enter VIP code: 314-223-9824) and be sure to tell anyone you know to sign up.  

As always, keep in constant contact with your realtor and feel free to ask me any questions.

Have a great weekend,

Chris 

**See the full article at: http://www.riverfronttimes.com/newsblog/2015/12/02/st-louis-will-be-the-nations-second-hottest-real-estate-market-in-2016

TRID-Top 9 Things Real Estate Agents Should Know

Uniform State Test Adopted by Missouri

Fourteen months ago the MBA of St. Louis asked the MBA of Greater Kansas City and the MBA of Missouri to join us in affecting change in Missouri. (At that time, Missouri was one of only 14 states still requiring a second state-specific test for licensed mortgage loan originators).

On January 1, 2016, independent mortgage bankers will no longer be required to take a Missouri state-specific test.  This will allow loan officers to save money and time in getting their license.  Great news! 

Importantly, the list of all states/regulators that have yet to adopt includes: Arkansas, Colorado, Florida, Illinois, Minnesota, South Carolina (BFI and DCA), Utah DRE and West Virginia.

TRID-We Are Ready!

Summer is over and fall is here.  Along with the weather changing, the mortgage industry is going through a big change.  We want to make sure you know what is going on.  

Beginning October 3rd, TILA-RESPA (commonly referred to as "Know Before You Owe") changes took affect.  You may be wondering how this impacts you as the buyer?  

The whole goal of this rule is to help consumers understand their options, choose the deal that’s best for them, and avoid costly surprises at the closing table.  (These things have always been important to us).  

You may have also heard that these changes could possibly delay closings.   We want to assure you we have been preparing for these changes for the past 12 months and increased our staff.  We have always been committed to speed.  The main take away is to stay in constant communication with us early and often.  Last minute changes can, in fact, lead to your closing becoming delayed.

Watch this short video for more:

https://www.youtube.com/watch?v=BazmJYxZoGY&feature=youtu.be

If you have any questions, please give me a call.

Chris

The Two Largest MLS's in Missouri Agree To Share Listing Data

As of September 1, 2015 realtors in Kansas City and St. Louis will be able to share listings.  This will give someone almost the entire state to look at when they are looking for houses!

*MARIS  and **Heartland Multiple Listing Service (HMLS) of Kansas City excitedly announced an agreement to share real estate listing data beginning September 1, 2015. 

Accordin to the announcement: "The reciprocal share of data will be facilitated through Realtors Property Resource (RPR). As the two largest Multiple Listing Services in Missouri, this agreement to share listing data will significantly broaden exposure for active listings within the state and provide more than 16,000 real estate professionals with access to expanded real estate data."

*MidAmerica Regional Information Systems (MARIS) provides the regional multiple listing service for the St. Louis Association, St. Charles Association, and the Jefferson County, Franklin County, East Central, South Central, Pulaski County, Lebanon, and Mineral Area Boards of REALTORS®.

**Heartland Multiple Listing Service (HMLS) is the most complete and accurate source of real estate information in the Greater Kansas City Metropolitan area. HMLS provides services to more than 7,500 real estate professionals in Kansas and Missouri.

Tips That Could Make or Break Buying or Selling A Condo

There is more to successfully selling a condo than updates, perfect pricing & taking good pictures.
In fact, it starts long before you put it on the market.  If you didn't research your condominiums home owner association before you purchased, and/or weren't actively involved during your ownership, you could have a very difficult time selling.  I have seen it happen too many times; a seller has a willing & qualified buyer, they have agreed to a price, and are ready to move forward with the sale.  Then, to the dismay of both parties, they find out that the home owners' association doesn't "qualify" for the loan.  So what does that mean?  Most loan programs have strict standards to meet when it comes to the purchase of a condominium.  (Especially the popular loan programs through Fannie Mae, Freddie Mac & FHA loans).

Potential reasons why a loan might be denied due to the HOA:

• The home owners' association doesn't have enough reserves (money set aside from HOA dues to cover maintenance or repair costs) 
• Too many investors in the complex.  The lender must consider the fact that renters may not take care of the property properly because they have no ownership interest.  Also, there is the potential for low reserve funds.  While homeowners don't necessarily want to see HOA fees go up, investors especially don't.  To an investor, $50/month on 10 properties = an extra $500/month.  The problem?  If there are not enough fees collected, the reserves could be depleted pretty quickly.

To avoid potential problems when selling, there are 2 major things to consider:

1. Use a realtor to help you research the HOA before you buy.  Your real estate agent can get information from the condo association.  Red flags: 
• If fees are low or aren't going up with inflation.  This could mean there may not be enough in reserves.  (Even if you never intend to sell, if a maintenance project comes up that the reserves can't cover, you may be expected to pay a special assessment.  This could be thousands of dollars). 
• Too much debt, and a lot of delinquent home owners 
• Inadequate insurance
• Pending lawsuits
• Special assessments
2.  Become active in your association from day 1
• Become either a board member or an active member who attends meetings, and/or volunteer for a committee
• The HOA can set limits on those who invest, conduct reserve studies, decide on HOA fees, etc
• Be informed of upcoming projects and/or make suggestions
• Get to know your board members and other owners

Cornerstone Mortgage does offer loans for warrantable (eligible for Fannie Mae, Freddie Mac or FHA) & non-warrantable condos.  But remember, if you purchase a non-warrantable condo, it may be difficult to sell in the long run.

Your realtor and lender are valuable resources, so use us!  Feel free to contact me at any time with questions.

Sincerely,

Chris Scheer

Your Residential Lending Team