How the shutdown will affect your loan application

 Mortgage Process, Residential Mortgage  Comments Off on How the shutdown will affect your loan application
Dec 272018
 

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

By G. Steven Bray

If you’re in the middle of the homebuying process, you may have some concerns about the government shutdown. Even though it’s only a partial shutdown, the parts of the government that are closed are kind of important to the mortgage world. However, the potential impact on your application depends on the type of loan you’re using.

If you’re using a conventional (Fannie Mae or Freddie Mac) loan, the shutdown probably won’t affect you at all. Fannie and Freddie operate independently of the government budget.

I see mixed impacts on FHA borrowers. Most borrowers will be unaffected as most FHA systems are automated, and those system remain online. However, if your situation requires human intervention, you may experience delayed processing. Additionally, FHA will not insure any reverse mortgages during the shutdown.

The VA is fully funded, and I don’t expect any impact on most VA loans.

The USDA, on the other hand, is shut down. USDA will not issue commitments during the shutdown, which means most lenders will not fund USDA loans.

If your loan requires a new flood insurance policy, expect a delay. Even though the National Flood Insurance Program is funded through May, FEMA is disallowing the issuance of new or renewal flood insurance policies during the shutdown.

Many lenders require verifications from the IRS or Social Security Administration as part of the loan process. Neither agency will process requests during the shutdown. Check with your lender as to whether this will impact your loan. Some lenders are temporarily suspending the verifications unless there’s an issue of data integrity, such as an unconfirmed Social Security number.

Finally, if you’re a government employee, and your agency is shut down, expect a delay as your lender won’t be able to verify your employment during the shutdown.

Higher FHA and VA loan limits, too

 Loan Guidelines, Residential Mortgage  Comments Off on Higher FHA and VA loan limits, too
Dec 172018
 

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

By G. Steven Bray

We found out a couple weeks ago that the conventional loan limit increased to $484,350. Over the weekend, FHA released its 2019 loan limits. By statute, the minimum FHA loan limit is 65% of the conventional limit, or $314,827 for a single-family home in 2019.

However, FHA allows higher limits in areas where 115% of the median home price exceeds the minimum. In TX, higher limits apply once again in the Austin, San Antonio, Dallas-Ft. Worth, and Houston metros, and for the first time, higher limits also apply in the Midland area and the city of Fredericksburg (Gillespie Co).

Unlike past years, the higher metropolitan area limits did not rise much this year. The DFW limit rose the most, by more than $9000, to $395,600. Austin’s limit rose about $6000 to $389,850. The limit in Houston and San Antonio remained the same at $331,200 and $359,950, respectively. Remember that these limits apply to all the counties in the metro, not just the cities themselves.

Among the new entrants to the higher limit list, Fredericksburg took the prize rising almost $30,000 to $324,300. The Midland area limit, including Midland and Martin Counties, rose $24,000, to $318,550.

The limit for the VA program mirrors the conventional loan limit at $484,350.

USDA programs shouldn’t be affected because loan size is driven by annual income limits, not median home prices.

Finally, these limits apply to single-family homes. Higher limits apply for two- to four-unit properties.

Rate update: Rate rally ran out of steam

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Rate rally ran out of steam
Dec 112018
 

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

By G. Steven Bray

The jobs report last week didn’t disappoint, but it didn’t excite either. Sure, the headline number of jobs created missed expectation, but the miss wasn’t huge by historical standards. Wage growth continued, albeit at a moderate pace. All in all the report did little to help bond markets decide whether the economy is slowing. Markets reacted as they’re wont to do in these situations – by shifting into sideways mode.

So, we keep looking for that source of market inspiration. Next up on Wed is the Consumer Price Index, the granddaddy of inflation reports. Since stoking inflation fears this summer, the report in recent months has suggested that inflation has waned once again. But like last week’s read on wage inflation, any uptick in consumer inflation could quickly erase the rate gains we’ve made since Thanksgiving.

If that report doesn’t give markets inspiration, next week’s Federal Reserve meeting might. Most analysts expect the Fed to raise short term interest rates for a fourth time this year, so doing that is unlikely to affect longer term rates like mortgage rates. Any effect is already baked in.

However, it’s what the Fed says after the meeting that probably will carry the most weight. Recent speeches by Fed governors have indicated the governors sense some risks to continued economic growth. If they translate those feelings into the post-meeting communication, rates could enter rally mode again. That said, I think a more likely outcome is an equivocal statement that leaves rate drifting through the end of the year absent something unexpected.

Rate update: Rising wages could thwart our rate rally

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Rising wages could thwart our rate rally
Dec 052018
 

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

By G. Steven Bray

It’s another jobs report week, and this could be an important one for mortgage rates. Rates have been trending down slowly for the last couple weeks aided by low oil prices and concerns about the sustainability of economic growth. It’s the latter that should be of more interest to those wanting lower interest rates.

While US economic data remains strong, market sentiment has become more equivocal. Several factors have contributed to this turn.

– The Federal Reserve has hiked short term interest rates three times this year and seems likely to hike again in a couple weeks. Markets worry that higher rates are going to choke off growth by making it harder for consumers and businesses to afford debt. An indication of their concern is the Treasury yield curve, the yield difference between short and long term Treasury bonds. The difference is as small as it’s been since the last recession and could go negative soon. A negative, or inverted yield curve has been an accurate indicator of recessions for the last half century.

– Even though the US economy appears strong, other economies have softened, and the World Bank continues to lower its estimates for global growth. Brexit and the Italian budget crisis add further uncertainty to the mix. A global slowdown should increase the appetite for US debt and reduce inflationary pressures, both of which help interest rates.

– Finally, some investors are simply worried the current economic expansion has gone on too long, and they don’t want to get caught on the wrong side of trading when it ends.

The wildcard this week is the jobs report on Friday. Watch the wage component of the report. Wage growth has moderated slightly since it jumped earlier this year. If that moderation continues, markets are likely to consider it a validation of the recent decline in rates. If the report shows elevated wage pressures, our recent holiday from higher rates could come to an end very quickly.

Higher loan limits for 2019

 Loan Guidelines, Residential Mortgage  Comments Off on Higher loan limits for 2019
Dec 032018
 

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

By G. Steven Bray

Rising home prices have prompted federal regulators to raise the loan limits for conventional loans starting in Jan. The maximum loan amount for a conforming loan on a single-family home, one eligible for acquisition by Fannie Mae or Freddie Mac, will rise to $484,350.

The Federal Housing Finance Agency (FHFA) reviews the loan limits each year as established by the Housing and Economic Recovery Act (HERA) and adjusts them as necessary to reflect changes in home prices. FHFA reported its housing price index rose 6.9% since the third quarter of last year, so it adjusted the loan limit higher by the same amount.

Higher limits apply in certain “high cost” areas where 115% of the local median home price exceeds the new limit; however, FHFA hasn’t indentified any of those “high cost” areas in TX. Higher limits also apply to two, three, and four unit properties.

For some historical perspective, conforming loan limits go back to the early 1970’s, when the single-family loan limit was $33,000. Congress set the limit to $417,000 in 2008, where it remained for several years until average home prices rebounded from the great recession.

FHA and VA set their loan limits independently of the conforming loan limit, and I’ll report those as soon as they’re available.