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RATES as of 9/5/08  

9am update - Now there is slight upward pressure on rates as the stock markets have recovered half of their losses on the day.  (If the markets were totally predictable everyone would be rich)

original a.m. report: The weaker than expected August employment report is putting further downward pressure on mortgage rates.  Long term mortgage securities are at the lowest rates since 6/2/08.

Stocks are down almost 1% today after a terrible day yesterday.  Oil remains near $107.  In August the U.S. lost 84,000 jobs and the unemployment rate spiked to 6.1% from 5.7%.  This is the highest in 5 years and a big increase from the recent low of 4.4%.  This report provides further confirmation that the economy is slowing heading into the end of the year.   The credit crunch and housing value crisis will be a drag on the economy for several more quarters(more rate outlook analysis below)      __________________________

30day lock RATES with NO PPAY PENALTIES ,  NO POINTS on rates quoted.  Lower rates available with points.  

Fixed Rates

Product Conforming Jumbo
30 year 6.125% 8.00%
15 year 5.625% 7.625%
20 year 6.00% 8.00%

SUPER CONFORMING            30yrfixed 6.25% 5/1 ARM 6.00%Conforming above $417k to $729,750 in most counties

Adjustable Rate Mortgages (ARMs)

Product Conforming Jumbo

monthly  ARMs  no neg amort. fully indexed

n/a

 

4.875%

 

3/1 5.75% %
5/1 5.75% 6.125%
7/1 6.125% 6.375%
10/1 % %

(all rates subject to rate adds for less than excellent FICO scores, higher LTVs, loan amount adjustments and for Cash out)____________________

RATE OUTLOOK (cont.)    Now that the early summer upswing in rates has been reversed there is a chance for rates to move closer to their low rates we saw earlier in the year.  This could happen if the markets think that the economy will have a much longer period of very slow growth, than is has been expected.  This is because a slow economy would cause the Fed to keep short term rates low for a longer time and a slow economy also wrings inflationary pressure out of the economy.  The stock and bond markets clung to the consensus that the "recession" will be short and mild and that the Fed and Congress actions would be successful in reviving the economic growth in the second half of 2008 and unemployment will not get much above 5.5%.  That was too optomistic and now the consensus has shifted toward thinking that the economy will not show much growth in the next few quarters and will not have stable growth until late 2009.  This change in consensus is reflected in the stock market slide of the last several months.  But interest rates are higher than earlier in the year because of inflation concerns.  The drop in oil from the early highs of around $145 although with the dollar strengthening in recent weeks are helping the outlook for inflation.

The market volatility we have experienced this year is because there is unusual uncertainty over the outlook for the economy.  Normally the consensus has a very high probability of happening.  But now there remains good chances of the economy being fine a year from now, as well as a chance that the economy could still be flat a year from now.  Furthermore there is a chance that the economy could improve but then dip into a deeper recession next year.  The wide range of possiblities for the economy over the next few years scares investors and will cause markets to be volatile until the outlook gets clearer. 

If we are lucky enough for rates to dip again they probably will not stay down long!!!  The few people who got the great rates Wed. 1/23  a.m. were the borrowers who were in process waiting for the right moment to lock.  The same with the great rates on 2/29 or 3/17!  There were similar dips in April and again around May 20.  While it is unlikely that rates will get back to the extreme lows of early in the year, anything at 6% or better is very good for a fixed rate and should not be passed up. Get ready for the next opportunity!  If you do not have a good fixed rate it makes sense for almost everyone to get one now.  When the economy improves it could be several years before we see rates this low again especially if inflation increases.  With all the uncertainty it makes sense to have your rate locked in for at least another 5 years.

WHAT DRIVES LONG TERM INTEREST RATES?Long term rates including mortgage rates react mostly to the expectation for inflation over the next 10 years so long term rates DO NOT move directly with the short term rate changes.  (See Frequently asked Question #1 to see graph of Fed Funds & mortgage rates).  The bond market actions most often preceed the Fed as the markets are able to analyze the same data that the Fed sees.

INTERMEDIATE TERM AND SHORT TERM RATES:  Short term rates are driven largely by the Fed's actions.  Intermediate term rates (3-7 yrs.) are in between and are much more influenced by the Fed's handling of short term interest rates.  For the most part the conforming intermediate term loan rates have been not more than .25% below the 30-yr.  But the jumbo intermediate term loans are far below the jumbo fixed rates because of lenders willingness to hold the intermediate term loans in their portfolios.

The Prime Rate remains at  5.00%, so prime tied HELOCs have again become very cheap money after a couple of years of being over 8%.  

Recent Rate Trend: Conforming mortgage rates steadily improved from mid-June '07 until early December with the 30-yr mortgage falling from 6.75% to 5.75% over this period.  In December rates backed up as much as .5% as the markets focused on signs that inflation had increased in late 2007. Rates again dropped   bottoming out on January 22 & 23 when the conforming rates hit their historical lows seen at times in 2003 -2005.  Rates quickly popped up off these extreme lows.  Rates have cycled up and down this year in a very wide range with the 30-yr conforming fixed varying from below 5.5% to 6.5% at the high.  In late May to mid-July inflation concerns caused long term mortgage rates to spike to the highest levels since mid Aug 2007.  Since peaking in mid July rates, rates held steady for a month before rallying to reverse the early summer spike in rates.

The Fed has cut short term interest rates by 3.25% since 9/07.  The Fed is unlikely to cut further.  Their next move is likely to be to increase rates but this is very unlikely before the end of the year and could be much later if the credit crunch does not improve.  The Fed would prefer to hold rates until the credit crisis is clearly over and the housing market has stabilized.  The Fed meets every six weeks with the next meeting 9/16.   

Annual core inflation (without energy and food) has seemed to moderate in recent months but is still above the Fed's target of 1.0%-2.0%. Total inflation is now running over 4%.  Inflation is unlikely to drop quickly but signs of improvement should help long term interest rates.  In 2003  - 2005 when long term mortgage rates were below 6%, inflation was running only about 1%.  So we are actually lucky that long term rates are as low as they are given the inflation outlook.

Borrowers with adjustable mortgages tied to Treasury & LIBOR indices and lines of credit tied to prime will be helped by the recent Fed rate cuts.  Option ARMs will come down too but not as fast.  

Call for information on additional products.  Rates are subject to change.  Call to confirm current rates.

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HOT PRODUCTS: 

Conforming: 30-yr fixed at 6.25% no pts                               5 yr. fixed (5/1 arm)at 5.75% no pts

SUPER CONFORMING (up to $729,750):     Purchases & No Cash Out Refis as low as 6.375% 30 yr fixed with no pts.  5 yr fixed (5/1 arm) at 6.00% (no pts)

JUMBO: 4.875% (no pts) -  monthly ARM, no neg. amort.    5/1 ARM @ 6.125% (no pts)                                   7/1 ARM @ 6.375% (no pts)

VALUE - EXPERTISE - SERVICE

Personal service from an expert from application through closing. With other mortgage brokers you deal mostly with processors and escrow officers who are not familiar with you or your loan. Tom is constantly on top of your loan from start to finish.  Tom keeps your loan on track and makes sure your loan closes according to plan.

Tom Sammon has the experience to understand your situation whether you are a first-time homebuyer, are self-employed or are a real estate investor.  Tom knows the lending market to get you the best loan programs at the best rate and lowest closing costs.   Experience is more important than ever in the current market.

With Tom you get the straight information from the beginning.  No false promises.  If you have shopped around you know that is very rare in the mortgage business.  You have Tom's guarantee that what you get at the end will be exactly what you expect.  No unpleasant surprises.  Tom will be there with you from the beginning to the end to make sure you understand your transaction and are satisfied with the results.

We are approved with the major lenders so we offer all mortgage products.  And we are constantly monitoring all lenders to know who has the best rate on each program at any point in time.  Mortgage brokers get wholesale pricing from lenders so we can almost always provide a lower rate and costs than you could get going directly to the lender.  Our low overhead and advertising costs are passed on to you to give you the best available rates and costs!

Tom Sammon Mortgage is committed to helping you find the right mortgage product for your needs. We understand that every borrower is different, and we offer a variety of products to meet your individual requirements. We make the process of securing a mortgage simple and straightforward by offering you the latest in financial tools that enable you to make sound financial choices. You need expert consultation when deciding on what loan is best for you. Tom is your expert.   Our mission is to make you comfortable that you understand your choices and have made the best decision.



Learn More

Contact Tom Sammon Mortgage to find out more about the products and services we can provide.

925 938-3535

tomsammon@sbcglobal.net




MORTGAGE NEWS

"JUMBO CONFORMING"  RATES IMPROVED:  These loans became available 3/17, but were priced disappointingly high.  IN MAY THIS IMPROVED GREATLY.  (RATES ON LEFT) The conforming limit is $729,750 in high cost areas (most Bay Area and coastal counties) through 12/31.  Purchase loans and no cash out refinances will go as high as 90% of the value.  Cash out refis will go to 75%. Tighter than normal underwriting standards will be applied.  ____________________

FHA Limits Increased:  On 3/6 the FHA loan limits were increased in the Bay Area to $729,750 (from $362,790).  This  gives borrowers with 3% - 5%down payment attractive financing options.  The FHA program had been useless locally because of the  low loan limit but now these programs will the best option for low down payment loans.  There are higher upfront fees including a 1.5% mortgage ins. fee.  and all have mortgage insurance but the rates are the same as the conforming 30-yr fixed.

JUMBO MORTGAGE MARKET:   The mortgage financing crisis began in 8/2007 when investors stopped buying jumbo mortgage securities.  Jumbo mortgages are securitized through Wall St. firms with credit guarantees by private bond insurers.  The conforming loans are guaranteed by the gov't sponsored mortgage agencies (FNMA & FHLMC) and are considered much safer.  Normally the Jumbo loans have rates around .375% higher than conforming loans to compensate for this risk.  However now the risk is perceived to be much greater and the jumbo loans shot up to 2% or more above the conforming loans.  The jumbo market rates have improved a little but not much.  Recently spreads to conforming loans are varying between 1.5% and 2%.

Lending standards are continuously tightening and there are more risk based pricing "add-ons" as the lenders continue to realize more losses.  Second mortgage lenders have incurred major losses & have tightened even more and piggyback loan programs (80/10/10s etc.) are  disappearing.  There are many borrowers who can not take advantage of current low rates because of declining home values and tightening lending standards.  Tighening from Lenders and mortgage insurers will continue until the housing market improves.

HOME EQUITY LINES BEING FROZEN - All most all of the major lenders have frozen lines for borrowers whose homes have fallen in value making their mortgages including the lines above 80% of the value of their home.  Some lenders are tightening to 65% of the current home value.