Author Archive
Good Faith Estimates and RESPA: Don’t lose sight of the big picture
March 8th, 2010
Written by Greg Frost
The Real Estate Settlement Procedures Act (RESPA) that took effect earlier this year has attracted a lot of attention both from the industry and from borrowers. The act requires that “loan originators provide borrowers with a standard Good Faith Estimate that clearly discloses key loan terms and closing costs and that closing agents provide borrowers with a new HUD-1 settlement statement.”
After several months with the new protocols in place, we have some perspective on the changes. From the buyer’s point of view, the new rules mean a lot more paperwork for a relatively small amount of money, since differences in Good Faith Estimates are rarely significant. And from our perspective, RESPA looks like a Band-Aid solution that doesn’t give buyers credit for their intelligence.
We pride ourselves on following the strictest standards, and we ensure that our people are up on all the latest developments, but we see the chance that too much focus on minutia could make us lose sight of the forest for the trees. Buyers, the details do matter, and you need to get the facts from a reputable broker such as Frost. But fear about relatively small amounts like these shouldn’t keep you from getting on with your lives. And those in the mortgage industry, you need to maintain a focus on what really matters–helping people get the funds they need to make society run, just as our industry has done for most of the last 200 years, by providing sensible, reasonably priced products that fit the need.
If you have any questions at all about what all of this means to you, please contact us today. We’ll be happy to help.
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Home buyers can save today by not trying to “time the market”
March 4th, 2010
Written by Greg Frost
Though the jury’s out on where we stand in terms of an overall economic recovery, mortgage rates remain historically low and tax incentives remain intact. There’s arguably never been a better time to purchase a home. That being said, here are a few significant dates to keep an eye on:
- On March 31st, the Federal Reserve will discontinue purchasing Mortgage Backed Securities. Most economists believe we’ll see increased mortgage rates as a result.
- Those wishing to take advantage of home-buyer tax incentives must have a binding purchase contract in place no later than April 30th.
Today, I’d like to address a common mistake many home shoppers make – trying to ‘time the real estate market’. In other words, some shoppers try to make their purchase at or near the bottom. In theory, this seems like a good idea. However, the following illustration makes a powerful point:
Hypothetical Home-buying Situation A:
Alvin has his eyes on a home currently listed for $250,000. He’s pretty sure he can negotiate the seller down to $240,000, but right now, the seller’s stuck at $245,000. What if Alvin acts today and pays $245,000 for the home? Assuming he qualifies for a 30-year fixed mortgage with a 5.5% interest rate and puts 20% down*
- Alvin ends up financing $196,000 ($245,000 x .8).
- Alvin’s monthly payment (P+I) would be approximately $1,113.
- Over the 30-year loan, Alvin will pay $204,631 in total interest.
Hypothetical Home-buying Situation B:
Alternatively, let’s assume that Alvin hangs in there for 60 days and gets his target price of $240,000. He feels great because he saved himself $5,000! However, let’s also assume that in the 60 days that passed, the rate on 30-year fixed mortgages increased from 5.5% to 6.5%*. (This type of rate increase can sometimes occur in a week, let alone a 60-day period.) Alvin’s still prepared to put 20% down, so
- He’ll finance $192,000 ($240,000 x .8)
- However, because interest rates rose from 5.5% to 6.5%, Alvin’s monthly mortgage payment is $100 higher ($1,213) than in Situation A when he’d paid $5,000 more for the home!
- Furthermore, Alvin will pay over $40,000 more in interest ($244,885) in Situation B over the life of the loan!
As you can see, trying to time the market can be a risky proposition – and often backfires. If you or anyone you know is in the process of purchasing a home, please feel free to share this advice with them. As always, I’d be happy to conduct this analysis free of charge and am honored by the trust you’ve instilled in me as your mortgage advisor for life.
* By the way, for illustrative purposes I used hypothetical rates for the above scenarios. If you’d like to know what today’s mortgage rates are, please feel free to call me today!
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Frost Mortgage Lending Group is #1 Division in PRMI
February 26th, 2010
Written by Greg Frost
Just got a report from our parent, PRMI Mortgage, listing Frost Mortgage Lending Group as the #1 Division in the company. I truly appreciate the effort and professionalism of every one of our Net Branch Partners.
Greg Frost
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The New Frost Mortgage Lending Group 2.0
September 20th, 2009
Written by Greg Frost
Frost Mortgage Lending Group is excited to announce the launch of our new web site and blog, which has been in production for several months.
By leveraging Web 2.0 social media tools, Frost Mortgage has a greater opportunity to reach our valuable clients, referral partners and branch partners online.
Our commitment is to provide updated daily information relevant to the needs of Homeowners, First-Time Home Buyers, Real Estate Agents, Financial Planners and our Branch Partners.
This site is designed to communicate with our viewers on their terms by including several interactive tools:
- Simple Contact Forms
- A Quick Mortgage Application / Questionnaire
- Google Maps – to locate a branch near you
- Mortgage Calculator next to each article or page
- Content Categories – so you can easily find the information you need
We look forward to connecting with you on the web as our online presence evolves.
Please feel free to contact us today if you would like more information about working with Frost Mortgage Lending Group.
Thank you,
Greg Frost Sr.
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What’s Ahead For Mortgage Rates This Week : February 2, 2009
February 2nd, 2009
Written by Greg Frost
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Consumer confidence reached an all-time low and 100,000 Americans were issued layoff notices last week, each playing a role in the mortgage market’s relative worsening.
For the third consecutive week, mortgage rates rose and average loan fees increased, too.
Amid all of the negative economic news, however, there were two bright spots worth identifying and discussing. They show that country may be closer to economic recovery than expected.
First, the supply of “used” homes for sale fell from 11 months to 9 months nationwide. This suggests that homebuyers are re-entering the housing market in force, a signal that home prices are nearing equilibrium.
And, second, the nation’s GDP — a measurement of the country’s complete economic footprint — didn’t fall by nearly as much as what the experts had predicted. A positive surprise like this makes us wonder about what else the Doomsday Economists may be wrong.
We won’t have to wonder long.
With this week comes copious amounts of data, legislation and rhetoric to influence mortgage rates. Some of the news-bites that mortgage markets will digest this week include:
- The Personal Consumption Expenditures Index report. PCE is a preferred inflation measurement and inflation is the enemy of mortgage rates. A high reading will pressure mortgage rates up.
- Retail stores report on same-store sales.
- The Pending Home Sales report. This notes the number of “homes under contract” and is a good gauge for buyer interest and the general health of housing.
- 20% of the S&P 500 firms will report earnings.
- Congress is expected to vote on the Stimulus package.
The biggest impact on rates, however, could come on Friday with the release of January’s jobs report. Employment data is always market-mover and with the press giving so much attention to layoffs lately, expect Wall Street to be extra jittery it.
Markets expect the economy lose a half-million jobs in last month.
(Image courtesy: Wall Street Journal Online)
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What To Expect From The Fed Today And How It May Impact Mortgage Rates
January 28th, 2009
Written by Greg Frost
The Federal Open Market Committee adjourns from its 2-day meeting today.
The monetary policy-setting group is expected leave the Fed Funds Rate within its current target range of 0.00-0.250 percent.
This is the lowest range for the Fed Funds Rate in history and, frankly, there isn’t much room left to go lower. Therefore, markets aren’t really concerned about what happens to the benchmark lending rate today.
Instead, markets will focus on the Fed’s ideas to revive the U.S. economy.
In its post-FOMC press release last month, the Federal Reserve pledged to “employ all available tools” to get the economy moving in the right direction. At the time, some of those tools were already in play, including making direct loans to large companies and buying bad debts from commercial bank balance sheets.
And since that meeting, the Fed has put its money where its press release is.
Early this year, the Fed started a program to buy $500 billion in mortgage-backed debt and those ongoing purchases are part of what’s keeping mortgage rates relatively low. The Fed has since made it easier for member banks to borrow money, too.
Each of these steps is meant to pour gas into the U.S. economic engine and the Fed is pledged to keep trying new approached until something works. And this is what mortgage markets will be concerned with today.
If the Fed’s next stimulus plan is deemed ineffective or too costly for its own good, mortgage markets will likely sell off, causing mortgage rates to rise. The jump could be somewhat sudden because Fed announcements are often met with emotional, knee-jerk reactions.
By contrast, if the Fed’s next steps are deemed on target, expect mortgage rates to fall only slightly. To some extent, this outcome is already priced into rates as of this morning.
The FOMC’s official press release hits at 2:15 PM ET.
(Image courtesy: The New York Times)
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An Interactive Chart For Home Values
January 21st, 2009
Written by Greg Frost
The S&P/Case-Shiller Home Price Index is a popular measure of domestic home prices, released monthly.
The index reports on the largest 20 U.S. markets, painting a broad picture of real estate values nationwide.
Despite the Case-Shiller Index’s two obvious flaws — (1) it only counts repeat sales on single-family residences, and (2) it only includes 20 major housing markets — the model is helpful in identifying broader real estate trends in our nation’s largest cities.
But data is just data. Sometimes, it takes a good picture to bring it all home. Enter The New York Times.
On its website, The Gray Lady posted an interactive Case-Shiller graphic. For each of the 20 cities studied, users can compare how home values rose versus the national composite throughout the early part of the decade, and how values have fallen since.
Not surprisingly, of the 20 cities that showed stable growth pre-2006, nearly all are outperforming in the current real estate climate.
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