Oh, no! Trump dismantling consumer protection

 Regulations  Comments Off on Oh, no! Trump dismantling consumer protection
Feb 202017
 

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

By G. Steven Bray

Despite the hysterical headlines that President Trump was dismantling consumer financial protections by executive order, the truth is much less exciting.

Trump has called Dodd-Frank, the recession-era law that created the current regulatory structure, a disaster and pledged major reforms. Earlier this month, he ordered his financial team to review the law and develop a plan to overhaul it. This starts a likely many-month process to modify Dodd-Frank and other financial regulations that are stifling lending and driving community banks out of business.

While Trump conceivably could rewrite or reverse some financial regulations once his appointees take charge at various federal agencies, he cannot change statutory rules, such as those enacted through Dodd-Frank, without Congressional action.

Unfortunately for those hoping for quick action, that appears unlikely. While the House already is moving legislation to rewrite the law, Senate Republicans need help from Democrats. Senate Banking Comm Chair Mike Crapo says, “The climate right now in the Senate is as toxic as I’ve ever seen it.” Crapo hopes he can get some Democratic support for changes that will promote lending by easing rules for smaller and community banks.

The eventual changes could be significant, but the pace of change will allow for serious consideration and certainty doesn’t justify the silly headlines.

Credit bureaus may boost your credit score

 Credit Scoring  Comments Off on Credit bureaus may boost your credit score
Feb 152017
 

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

By G. Steven Bray

The three national credit bureaus (TransUnion, Equifax, and Experian) announced that they will change the way they collect public record data. These are items like judgments and tax liens that appear on your credit report. The change is due to concerns the bureaus have with the accuracy of the data. Specifically, the bureaus will:

– require public records to have minimum identifying information including a person’s name, address, and SSN and/or date of birth; and
– require public records to be collected and updated at more frequent intervals.

So, why should you care? The bureaus have analyzed the potential effects of this change and have concluded that:

– approximately 96% of civil judgment records may not meet the new requirements; and
– as many as half of tax lien records may not meet the new requirements.

If a record fails the meet the new requirements, the credit bureaus will not include it on your credit report.

The changes are expected to take effect no later than July of this year.

Rate update: Yellen’s testimony could move rates

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Yellen’s testimony could move rates
Feb 132017
 

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

By G. Steven Bray

The bond market seems to have leveled off waiting for something to give it direction, and that something may happen this week. Fed head Yellen testifies before Congress on Tues. In the past she’s used these opportunities before Congress to clarify the Fed’s intentions. The question on deck is when is the Fed going to stop purchasing mortgages.

The Fed has an enormous portfolio of mortgages. When one of these mortgages pays off (through a home sale or refinancing), the Fed has been buying new mortgages. Recently, a couple of Fed governors indicated it’s time to stop these reinvestments and allow the Fed’s portfolio to shrink.

Here’s the problem. The Fed buys one to two billion dollars of mortgages each day. If the Fed stops buying, investors have not shown a willingness to pick up the slack. It might take higher interest rates to clear the market.

Yellen is unlikely to announce this policy change outside a scheduled Fed meeting. However, if she hints that the change is coming soon, markets are likely to lead off with higher rates.

The other things I’m watching this week are the inflation reports Tues and Wed and reaction to Pres Trump. Both could be negative for rates.

As I said last week, the report on wage inflation was comforting, but it’s not the only inflation report. If this week’s reports hint at budding inflation, they’re likely to boost rates.

Rates last week turned higher after Trump announced he’ll reveal his tax plan soon. Equity market loved that and rallied to new highs. That seems to have left less money for bonds causing rates to rise a little. As long as investors are feeling good about the future, I think we’ll continue to see some upward pressure on rates.

Rate update: Jobs report takes pressure off rates

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Jobs report takes pressure off rates
Feb 062017
 

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

By G. Steven Bray

We have an interesting contrast setting up. As I mentioned last week, I’ve been paying more attention to inflation data recently as inflation is the enemy of low interest rtes. Recent economic data had shown budding signs of inflation, but last week’s jobs report kind of squashed that. Wage inflation was a third of expectations, and the previous month’s elevated number was cut in half.

What does that mean? Wages are the vast majority of business expenses. When wages rise, it puts pressure on retail prices. Wages hardly budged during the economic recovery, which resulted in negligible inflation. Last week’s jobs report suggests that wage growth remains weak, and thus prices are unlikely to shoot higher.

Here’s the contrast. Several members of the Federal Reserve recently stated they see rising inflation, which suggests they’ll be more aggressive about hiking interest rates to slow down the economy. A more aggressive Fed will tend to push mortgage rates up, but if wages aren’t growing, homebuyers won’t be able qualify. Instead of choking inflation, a more aggressive Fed may choke the economy.

Why canceling the FHA rate reduction was the right move

 Loan Programs, Residential Mortgage  Comments Off on Why canceling the FHA rate reduction was the right move
Feb 042017
 

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

By G. Steven Bray

I’m sure you know by now that the Trump administration cancelled the FHA mortgage insurance rate reduction put forward in the waning days of Obama’s term. This caused moans from most of my housing industry friends, but I think it was the right move.

First, keep in mind that FHA MI provides insurance against defaulted FHA loans. By law, the insurance fund must be at least 2% of the FHA’s loan exposure. The fund last year exceeded the 2% threshold for the first time in many years. Given that economists are predicting a housing slowdown this year, wouldn’t it make more sense to let the fund grow a little before chopping the premium?

Second, I don’t believe the premium reduction would have resulted in many additional homebuyers. Instead, I think it simply would have transferred business from private mortgage insurance companies to FHA. I’ve never seen an honest analysis from HUD to justify its MI rates based on its risk exposure. Moreover, FHA also has up-front MI and never cancels its MI, unlike conventional loan mortgage insurance. If FHA wasn’t just trying to increase its market share, maybe it could have tweaked those characteristics.

In conclusion, I’m not convinced the move by the outgoing administration wasn’t intended to make the incoming team look bad. Personally, I think it makes them look prudent.

Rate update: Watch for a dip

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Watch for a dip
Jan 302017
 

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

By G. Steven Bray

The normally dovish Fed head Yellen squashed dreams of lower interest rates a couple weeks ago when she said she thinks the economy is just peachy and she sees many more rate hikes in the next couple years. Bond traders headed for the exits, and interest rates shot up.

Her pronouncement reinforced the prevailing market sentiment that due to the Trump administration’s policies, economic growth and inflation are likely to exceed current expectations.

While that’s a reasonable conclusion, and it makes sense be cautious if you’ve not locked your mortgage rate, I don’t think the market is going to run away again like it did after the election. There still are so many unknowns concerning the new administration’s policies and how the world will react, in addition to the many other hurdles already facing the world economy.

The one economic measure that has my eye right now is inflation. While the Fed’s preferred measure, the core PCE index, remains benign, other measures are starting to tick up, and consumer expectations of inflation also are rising. Of course, those expectations could quickly reverse if oil prices start falling again.

The result of all this, I think, will continue to be market volatility. While market sentiment favors slightly higher rates, volatility would allow you to find a friendly dip to lock your rate.

Rate update: Mortgage rates heading lower again

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Mortgage rates heading lower again
Jan 122017
 

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

By G. Steven Bray

Interest rates have pulled back a little from their recent highs. While that’s welcome relief after the post-election rise, it begs the question are rates going to continue rallying lower, or are they merely catching their breath before pushing even higher?

One thing seems clear to me. Markets were caught up in somewhat irrational exuberance after the election, which led to the 3/4 point jump in mortgage rates. Sure a Trump presidency is likely to be more business friendly, and sure an expanding economy could lead to higher interest rates. But, seriously, we know very little about the policies his administration will pursue, and many of those that have been mentioned, such as infrastructure spending and tariffs, may take years to develop.

I think the recent pullback is an acknowledgement of that, and it leaves markets struggling to find direction. The world still is a scary place, and the Trump administration is still a bit of an enigma. Given this, rates can get pushed around from day to day based on headlines and trade-flows. Overall, I think it’s more likely we’ll see lower rates than for rates to start rising again; however, I doubt it will be a straight line. If you want to bet on lower rates, pick a bail out point when you’ll lock if the market starts to move against you.

Rate update: Rates waiting on ECB decision

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Rates waiting on ECB decision
Dec 072016
 

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

By G. Steven Bray

Mortgage rates have finally settled down a little from their post-election romp. We’re still seeing volatility with big changes from day-to-day, but overall, the market seems to be waiting for the next big thing.

That thing may happen tomorrow. Before the election, we fretted about the European Central Bank’s decision on whether it will begin to taper asset purchases. It promised to let us know at its Dec 8th meeting. Last week, a leaked report suggested the decision had been made – tapering would start. But, then the Italians resoundingly defeated a measure supported by the financial elite that would have given the prime minister more power to implement austerity measures. Now, the press is talking about how long Italy will remain in the EU.

If the ECB starts to taper, the decision is likely to drive up bond rates, and markets seemed to price-in that decision earlier this month. However, if the ECB postpones the decision again, we’ll probably see rates fall, maybe as much as a quarter-point. Markets this week seem to be hedging towards the latter outcome with rates improving slightly.

FHA loan limit going up in 2017

 Loan Guidelines, Residential Mortgage  Comments Off on FHA loan limit going up in 2017
Dec 052016
 

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

By G. Steven Bray

FHA also is raising its area loan limits in 2017, primarily affecting the 4 largest metro areas. FHA sets the limit by county and calcuates the limit based on 115% of the county’s or metro area’s median home price.

Median home prices rose in Texas last year, so loan limits rose in the Austin, Dallas/Ft. Worth, San Antonio, and Houston metro areas. Austin’s limit rose almost $30k to $361,100 for a single-family home. The DFW limit rose about the same amount to $362,250, still the highest in the state. San Antonio’s limit rose about $10k to $327,750. Houston, given its flagging market due to the oil industry downturn, rose only slightly to $331,200. Remember that these limits apply to all the metro’s counties, not just the cities themselves. The limit for the rest of the state rose about 2% to $275,650.

These limits apply to FHA case numbers assigned on or after Jan 1st. The case number typically is assigned at the beginning of the mortgage process, so if you need these higher limits, you’ll need to be patient.

Get ready for larger conforming loans

 Loan Programs, Residential Mortgage  Comments Off on Get ready for larger conforming loans
Dec 012016
 

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

By G. Steven Bray

The maximum conforming loan limit is going up in 2017. This is the max loan size for a Fannie Mae or Freddie Mac mortgage, what we sometimes call a conventional loan. The new limit will be $424,100, up from $417k.

This is the first increase since before the financial crisis. The Housing and Economic Recovery Act of 2008 established $417k as a baseline and directed the Federal Housing Finance Agency to adjust the limit each year to account for changes in the national average home price. However, the Act required that the limit not rise until home prices had recovered to their pre-crisis level.

The FHFA set third quarter of 2007 as the official pre-crisis price level, and the price level in the third quarter of this year exceeded it by 1.7%. The increase in the loan limit matches that increase.

The new loan limit is effective Jan 1st.