Rate update: Happy juice flows; Rates rise

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Happy juice flows; Rates rise
Apr 242017
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Investors seem to have found their swagger again. After spending a couple weeks fretting over the many uncertainties in the world, and as a result pushing bond yields lower, they’re casting their fears aside and back on the happy juice. The inspirations for this change in sentiment seem to be the outcome of the French election and expectations for a Trump tax plan.

Interestingly, the French election results were as expected: the establishment candidate bested the “scary” nationalist candidate Le Pen by a couple points, and they will meet in a runoff election in a couple weeks. What seems to have quelled fears is that Le Pen didn’t outperform pre-election polls, and those polls predict a drubbing for her in the runoff. The EU is safe again – for now.

I’m not sure that would have been enough to turn market sentiment if it wasn’t for the Trump talk. Investors had started therapy sessions over the failed advance of the Trump agenda, but the depression lifted last Fri when Trump promised details of his tax reform plan this week. Never mind that it faces a still divided Republican House. Tax cuts are like crack for investors causing them to ignore the difficult week ahead culminating with a potential government shutdown.

While I think we could see some further pressure on interest rates for the next few weeks, the crystal ball beyond that period is cloudy. Recent US economic data has been surprisingly weak, especially inflation data, and it’s still unclear whether Congress can find consensus. Balance that against central bankers’ urge to normalize monetary policy. The resulting mixed picture leaves rates without much direction and subject to headline abuse.

LLC-financed rental homes won’t prevent use of Fannie loan

 Investment, Loan Guidelines, Residential Mortgage  Comments Off on LLC-financed rental homes won’t prevent use of Fannie loan
Apr 172017
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

One of the more frustrating loan guidelines encountered by rental property owners is the limit on the number of financed properties. Fannie Mae limits the number to 10 – 4 for best-rate financing. While Fannie hasn’t changed that guideline, it has changed which properties count towards it. Previously, properties financed through an LLC counted towards the limit. Now, if the borrower financed the property through an LLC so that the borrower is not personally liable on the mortgage, Fannie excludes the property from the total.

This should be a nice change for investors who use multiple financing tools to manage their properties. Investors often use shorter-term bank loans to finance the initial acquisition of a property, and bank portfolio loans often will allow a seasoned LLC to sign the note. Now, if the investor wants to roll a property into long-term, lower-rate, conventional financing, those short-term loans won’t get in the way.

Keep in mind that financed primary residences and vacation homes still count towards the total. Also keep in mind that some lenders will count a spouse’s financed properties towards the total even if the spouse isn’t on the new loan. Finally, remember that the limit only includes one-to-four-unit residential properties. Anything else, including land, commercial properties, and timeshares, do not count towards the total.

Rate update: News headlines will push rates lower

 Interest Rates, Residential Mortgage  Comments Off on Rate update: News headlines will push rates lower
Apr 122017
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Investors abhor uncertainty, and last week certainly provided plenty of it. Will the response to the Syrian gas attacks lead to more US involvement in that country’s civil war? How are the Russians and Iranians going to react? Are North Korea’s threats more than chest-thumping? What’s the US carrier group doing in the Sea of Japan?

When investors see uncertainty, they tend to buy safe assets, and US government bonds are among the safest. Lots of bond buyers leads to lower bond rates, and because the US government backs most US mortgages, we also get lower mortgage rates – in fact, the lowest rates of the year.

So, are we seeing a sea change with rates heading lower, or will they bounce higher again. The chances for still lower rates are real, but that probably depends on continued headlines to churn investor sentiment. The President set markets on fire again today with comments suggesting the dollar is too strong.

Rates rose after the election largely because of expectations for the Trump agenda. While markets seem to have realized the agenda will take time to implement, positive movement on policies such as health care and tax reform could keep some pressure on rates.

More concerning for those wanting lower rates is the voices of the Federal Reserve. The Fed has a huge portfolio of mortgage bonds, and it replenishes that portfolio by buying more bonds with the money from paid-off mortgages. Fed governors have been talking about reducing the portfolio. Pundits are convinced mortgage rates will have to rise to find bond buyers to replace the Fed, and the market will start pricing in those higher rates long before the Fed pulls the trigger.

Rate update: Politics, inflation, and mortgage rates

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Politics, inflation, and mortgage rates
Apr 042017
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Mortgage rates pulled back a little last week as markets came to terms with political realities. However, volatility remains as the path forward for Trump’s policies remains very unclear.

While we may not get political clarity this week, economic data could trump that concern and set the direction for short term rate movement. Last week’s inflation data, the Personal Consumption Expenditures index, came in slightly hotter than expected, and wage inflation seems to be building. This week is a jobs report week, which gives us another read on wage inflation this Fri.

A maybe more anticipated event this week is the release Wed of the minutes from the last Fed meeting. The Fed has indicated these minutes will include a new forecasting format. It seems the panic surrounding potential rate hikes has subsided, but I’m sure markets will scrutinize the new charts for hints that the panic was justified.

The week is full of other economic reports, and we also have the ongoing political gymnastics in Washington and overseas. I think it’s most likely this will result in push-me/pull-me action on rates this week. However, if any one of them suggests unexpected political certainty, economic strength, or inflationary pressures, it could move rates quickly higher.