Danny Salas

Archive for October 16th, 2009

Chico, CA Interest Rates Market Report – Economic Influences – October 16, 2009

Interest Rates Benefiting At The Expense Of Stocks

We Have Support

The 50-Day Moving average has acted as a huge layer of support, since August.  True to form, today, Mortgage-Backed Securities Bounced right off of that trend line and is patiently sitting right above it.

Stocks Now Down

With Bank of America reporting its 1st loss of the year, Stocks are taking the hit.  General Electric and IBM also reported less than attractive earnings.  With money pouring out of Stocks, generally, those investors find a safe haven in bonds, and therefore, Mortgage-Backed Securities.  The higher the bond value, the lower the yield.  The lower the yield, the lower the interest rate.

Conflicting Growth Figures

Industrial Production and Capacity Utilization were reported somewhat higher than expectations.  This pressure on the economy is good, however, bad for interest rates.  But don’t panic.  We’re still well below inflationary readings on these reports.

Consumer Sentiment is lower than expectations.  This is showing that consumers are more interested in saving and paying down debt, than spending.  Not so good for the economy, but good for interest rates.  The consumer thinks that unemployment has hit its bottom.  I’m not so sure.  I don’t think our struggle is over yet.  We’ll have to wait and see…

Locking In…

Well, I’d float today.  We have the support of the 50-Day Moving Average and Stocks aren’t liking the 3rd Quarter Earnings Reports that keep coming out…so we’ll watch these levels, carefully!

You Say It’s Your Birthday…

Tomorrow’s my birthday.  I will have lived forty-two years on this planet, and I must say, they’ve been good to me.  I am spending the weekend with my family and some close friends.  I hope your weekend is as enjoyable as I expect mine to be.  As Brian Phelps says (Mark & Brian), “Be good humans!”  Until next week…

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MDIA Changing The Seller Credit

Seller Credits Can Now Be Particular

No More Seller Credits?

Some banks’ legal departments are not allowing a bulk seller credit towards a buyer’s closing costs.  Instead, they want an itemization of each separate fee moved over from the buyer’s side of the HUD-1, to the seller’s side.  Remember, Mortgage Disclosure Improvement Act (MDIA) changes went into effect for loans that have application dates after July 30, 2009.  So, if the fee is never charged to the buyer and credited back from the seller, it’s never a buyer’s fee.  Therefore, it doesn’t effect the buyer’s Annual Percentage Rate (APR).

Beware Of Last Minute Delays

If a buyer is paying 1.0% Point for a 5.0% interest rate, it changes their APR, right?  However, if a seller pays 1.0% for a buyer’s 5.0%, it doesn’t effect the buyer’s APR, because the buyer is never charged the fee.  And, don’t forget, if you’re at escrow and have disclosed a credit from the seller, and then the bank makes you draw loan documents with no credits, only seller paid fees, it will change your buyer’s APR, and therefore, MDIA kicks in and you must re-disclose, and the buyer can’t sign documents for three days.

Writing The Offer

We haven’t seen it required, yet, however, this structure should change how you write a seller credit.  It would actually read, seller to pay 3-6% (of sales price) of the buyer’s recurring and non recurring closing costs.  Or something more particular, like that.  Not the forever used, “seller to credit 3-6% of the sales price towards buyer’s closing costs.

A Smooth Close

So, when working with seller credits, make sure your banker has disclosed the credit properly; according to their bank’s legal department, received the fees from their escrow officer, and disclosed all of these to the buyer, at least three days before the buyer is supposed to sign their loan documents.  It will create a smoother closing.