Hello Friends, Mortgage interest rates remain fl at since April 1st of this year, despite all the volatility in the stock market.
The media keeps report ing rate drops drops when when we we aren’t aren’t feeling feeling any any signi signi fi fi - - cant rate movement since the initial rate drop after the Federal Reserve Meeting in March of this year. Rates remain .25% lower now than at the same time a year ago.
I want to dig in a little on Jumbo lending. What we call Jumbo loans are actually Non-Conforming mortgages that do not follow Fannie Mae/Freddie Mac underwriting guidelines. Every lender who offers Non-Conforming loans is either lending their own money and keeping those loans in their portfolio or they have investors who are offer ing these portfolio loan products that the lender underwrites and sells to the investor after closing the loan. Each portfolio lender/investor may have their own unique set of underwriting guidelines that may differ from investor to investor. In many cases, a 30-Year Fixed Jumbo loan with similar interest rates can have some very specifi c variances in the underwriting guidelines that would prevent a borrower from getting that loan from one investor, while being able to secure that loan with another investor.
The next question that arises is why would any borrower work with mortgage brokers for Jumbo loans if the rate is diffi cult to match in the current lending environment? The answer is that since each investor’s portfolio lending guidelines are proprietary and unique, it takes an expert to understand and compare these many differing guidelines and someone who has access to multiple lenders/investors to get these Jumbo loans closed. That expert is the mortgage broker who works hand in hand with mortgage lenders to fi nd products that can fi t with different borrowers’ unique combination of factors.
You would be surprised to fi nd out how the smallest of guideline variances can kill the loan.
The large banks will always advertise their lowest rate for Jumbo loans, but that lowest rate comes with the narrowest of boxes that each borrower must fi t within to get that loan. The underwriting guide lines for these Jumbo products don’t necessarily make common sense to the borrower and I see this happen over and over again. As I always say, mortgage lending makes zero common sense. It is a series of arbitrary underwriting guidelines that risk managers publish for the bank’s underwriter to follow in order to fund the loan. The underwriters’ job is to kill the loan by fi nding defi ciencies in the borrowers’ loan fi le that doesn’t match with the loan products’ underwriting guidelines. Many borrowers who have the income, down payment, and credit scores to be able to look at higher priced homes that require Jumbo loans feel like they are great risks for banks. Most of them are. Unfortunately, the banks aren’t required to fund loans and can do so at their discretion. The banks create tight guidelines because they can and, since the attrition and consolidation of banks during the Great Recession, they have no competition. I work in Jumbo loans on a regular basis with well qualifi ed borrowers who cannot get the loan through the institutional bank that I get closed. I am running out of room on this issue of the newsletter, but I will drop in some Jumbo loan examples on the next issue that shows well qualifi ed borrowers who couldn’t get Jumbo loans through the institutional banks that I helped to close.
Please feel free to contact me directly for a free credit check and mortgage consultation.