Even Better Rates

Rates continue to drop - the main question is, "how long will this last?" If you've been on the sidelines, now is the time to act. In the past year, these low rate "seasons" have been short and those trying to time the bottom missed out. If you like it, lock it. Give us a call today at 1-888-780-8781.

Karen

Great Rates

As you may have heard on the news, rates have come back down! Finally, we're seeing mortgage rates that make sense with everything else that's going on in the market. If you've been waiting for the rates to be in the 5's to purchase or refinance, now is the time to move!

We do hope the rates remain low for an extended period of time, however, recently that has not been the pattern. So, if you've been on the sidelines, we suggest that you act quickly.

If you need to be approved to purchase a home or are looking to refinance for any reason, give us a call at 1-888-780-8781.

Hope you had a wonderful Thanksgiving. God's blessings are never ending.

Karen

Better Days

The Robbie Seay Band has a song that says "here come better days." In the market we're currently in, we can stand on that promise! As Rich mentioned in his last post, we saw a huge spike a couple weeks ago in mortgage rates, but they have continued to come back down.

If you're in the market for a mortgage right now, whether for purchase or refinance, our advice is "if you like it, lock it." We've seen people miss an opportunity for a great rate or program because they were hoping it might get a little bit better, only to find themselves in the midst of market turmoil.

If you're a first time home buyer, we understand that this market can seem scary but that's why we're here - to help walk you through it and explain what's happening each step of the way. You can still purchase with very little money down or $0.00 down payment if you qualify for a VA (veteran) loan. There are affordable homes available and seller help for closing costs. The down payment amount will be increasing slightly beginning next year so now is a great time to act.

Rate Update

Hey folks - interesting times in the market. That's an understatement!

Rates skyrocketed over the last week and have just begun to normalize. The unintended consequence of the TARP legislation ( that is the nickname for the rescue/bailout) is that mortgage rates increased due to credit spreads -however, as the credit market begins to "thaw out" we expect rates to normalize.

What does all of that mean in layman's terms - rates are higher rate now but we expect them to move lower in the next couple of weeks.

Rich

In the News

I'm taking a break from the busyness of loans to update our blog. It's been a whirlwind month with mortgage bailouts, Fannie, Freddie, the list goes on.

So, I'm taking a moment to let you know that in the midst of all the craziness, there's good stuff happening. From first time homebuyers to the experienced investor, many are finding a silver lining in what is going on in the housing market. How exciting to step back from the bigger picture and realize that right now, someone is becoming a homeowner for the first time, putting the keys in their own front door, picking out paint colors and furniture!

For those who already have a home and have equity (yes, it still exists!), we're helping people gain control of their finances by consolidating debt or helping with home improvement projects.

I could go on, but I simply wanted to step back for a moment and reflect on the good that's happening.

For those in a challenging season, please remember that there is always Hope. There's a light at the end of the tunnel, no matter what CNN or your 401k statement says :)

Holding Steady

Rates continue to hold steady - so don't miss out before they start to go up later this year. There has been some good news about the housing market recently - with certain areas seeing a spike in home sales and other areas beginning to stabilize.

The 15 year mortgage rates continue to be the best deal in town if you can handle the higher payment of a 15 year mortgage.

Down Payment Assistance Programs

OK - so the FHA does not like down payment programs like Nehemiah or Ameridream because the default rates on these loans is higher than a homebuyer who makes a down payment. But, they do serve a purpose in helping folks with their dreams of home ownership. Let's not forget that with a FHA loan you must qualify full documentation under pretty rigid guidelines - so with that being said - the DAP's are going away as of October 1.

So if you have been on the sidelines regarding a purchase and you need down payment assistance from the seller -then you need to act now. Because after Oct 1 - you will need 3.5% as a down payment and on a 200K purchase, that would be $7000.

There is some pending legislation to allow the DAP's, but as of right now - the deadline is Oct 1.

Also, don't forget when purchasing a home to use this formula - you can normally purchase 3-4 times your total household income - your other debt influences that number.

Rich

Down Payment Assistance

On a Break

Here's the good news. Rich and I will both be utilizing this blog a lot more to keep you up-to-date on the happenings at Covenant Mortgage and in the mortgage industry. The not as good news...we're taking a little break from the radio show.

We love interacting with ya'll every Saturday, but right now, other commitments make the time we have to dedicate to the show impossible. So, we'll still take all of your questions; you'll just have to call us at the office. (1-888-780-8781 or info@covenantfinancial.com).

Regarding the current market - now really is a great time to buy a home, especially for first timers! We're seeing amazing deals from sellers and rates are still very low. We're helping customers structure their purchases in a lot of different ways, so if you've been sitting on the sidelines, now may be a great time to get in the game.

So, keep checking this blog for updates, and if you have a mortgage need, please give us a call or send us an email. We love serving you!

Blessings,
Karen

Exciting Day

In case you are wondering, it's never good to have your office building surrounded by fire trucks. But, all told, this ended up not being as serious as this picture looks. We walked into our offices yesterday to the overwhelming smell of gasoline. After we called 911, we grabbed essentials (usb backups, cell phones & coffee :) and evacuated the building and watched as rescue teams from all over the area came to our rescue. Thankfully, it ended up not being anything too serious - just a gas spill in a unit directly below ours. Thank you to all who do a great job of protecting us - fire, police, emts, etc.

The other exciting part of the day was the news that the Fed is not increasing rates at this time. It was what was mostly expected at this meeting, but right now, there is so much uncertainty that it was somewhat of a relief for the meeting to be over and the markets seem to be reacting favorably to the decision.

Karen

Staycations

A new word that has entered our vernacular is the "staycation". Google doesn't even have this word in spell check yet, but if you do a google search for the word, you'll find about 480 results. Apparantly, the first siting for the word being used was in 2003. The urban dictionary definition: A vacation that is spent at one's home enjoying all that home and one's home environs have to offer.

We've helped a lot of customers get money for home improvements recently. For their staycation, they'll be either doing the home improvements, or enjoying the fruit of their labor. Now is a great time to consider adding the pool, finishing the basement, updating the kitchen, or whatever task your home is in need of. And when it's done, stay around and enjoy your updated home.

We are here to help if you need access to the equity in your home to fulfill your "staycation dreams".

Jumbo

Jumbo mortgages are hot right now - if you have a mortgage over 417K and you have value or want to purchase a jumbo loan - then now is a great time to act

Better rates- higher loan to values - and of course at Covenant - the Integrity Guaranty

Laminin

Okay - this has nothing to do with mortgages. A friend sent me this link, and it's awesome. How great is our God? Greater than we can fathom.

http://www.youtube.com/watch?v=_e4zgJXPpI4

Be blessed,

Karen

Guaranty or Guarantee

Just wondering- post your comments - is it Integrity Guaranty or Integrity Guarantee?

Stable Rates

Great news - the Federal Reserve just lowered rates once again - so now the Fed Funds rate is 2% and more importantly banks have lowered their prime rates to 5% - for those of you with Home Equity Lines of Credit - that's great news.

All of the Fed action should lead to a period of stable rates - so if you've been on the sidelines hoping rates would move lower - now is the time to act - we do not foresee rates going lower - but we do anticipate that rates will be stable over the next few months.

We are now in our new offices in Stafford, VA - we love them - and each Loan Officer now has their own office - at the old office - they were in cubicles.

Thanks for allowing us to serve your mortgage needs - If you need a mortgage call Covenant Mortgage at 888-780-8781.

Talk at you soon.

Rich

Great News!

Unlike some of the Fed's earlier rate decreases - this one seems to have had a positive effect on mortgage rates. The bond market is reacting very favorably to the Fed's decision and we're seeing that in the 30 and 15 year mortgage rates. Hopefully, this will continue for a few days :)



Just today someone mentioned to me that everything in the market seems negative - my encouragement to you is that there are many good things happening in the mortgage market. We're helping people everyday lower their monthly payments, purchase homes, get money needed for college, etc. The news media loves to focus on the worst case. Please don't misunderstand - I know that there are real people with real problems right now, but it's not everyone in the country and even for those who think there is no hope, there's always a light at the end of the tunnel.



Blessings,

Karen

Integrity Guaranty

Starting Monday, you'll be hearing more about our Integrity Guaranty. Committed to serving you with integrity has always been the cornerstone of how we operate our business. However, in this ever changing market, we feel that it is important to put a guaranty behind how we've always operated. It's our promise that you won't be surprised at closing.

As the owners of Covenant, we welcome the call for improved standards of disclosure. We are both members of the National Association of Mortgage Brokers and have achieved the designation of Certified Residential Mortgage Specialists and are proud to have the seal of "Lending Integrity" through NAMB (http://www.namb.org/).

When it comes to your mortgage - as we often say - the biggest financial decision that most people will ever make - it's never been more important to know who you are working with and to make sure that it's a company and loan consultant that you can trust.

Market Update

I have never seen the mortgage market so skittish. Lenders and Wall Street/Investors are tightening their guidelines - consumers have low expectations and many mortgage brokers/lenders are closing their doors.

So that's the bad news - the good news is that with the more restrictive guidelines; only the most qualified borrowers can obtain a mortgage and that means that there will be lower default rates in the future. Obtaining a mortgage is a significant and important financial decision. At Covenant we exist to empower you to be a good steward of your finances - sometimes that means waiting on a purchase -living on a budget and saving your money so that you are better prepared for the responsibility of a mortgage.

More good news - jumbo conforming is now available in our market - that means we can now finance your mortgage up to $729,750 in the DC metro area. There is a minor pricing adjustment for these loans.

Finally, there is still a rates conundrum - read the article below to better understand -

Rich Pennington



Fed Efforts Foiled By Banks as Residential Mortgage Rates Rise
By Bob Ivry and Sharon L. Lynch
March 15 (Bloomberg) -- Ben S. Bernanke can't revive the housing market and the banks are no help.
The U.S. Federal Reserve cut interest rates five times, pumped $200 billion into the financial system, and yesterday its New York branch provided funds to help rescue Bear Stearns Cos.
None of that has brought down mortgage rates for residential borrowers, whose success in refinancing or buying would help bolster the U.S. economy. The interest rate on a 30- year fixed-rate mortgage has climbed to 6.37 percent from 5.5 percent since Jan. 24, according to the Mortgage Bankers Association, as financial institutions try to cover $195 billion in mortgage-related losses and save capital for future losses.
``The mortgage rate isn't down as much as it should be because the banks are in desperate straits and they need to maintain a larger spread than they normally would,'' said Alan Nevin, chief economist with the California Building Industry Association in Sacramento. ``The banks need to generate income and the easiest way to do that is to broaden the spread. If they pay 3.5 percent and charge 6 percent, that's a lot of money.''
Over the past 10 years, the average spread between 10-year U.S. Treasuries and 30-year fixed-rate mortgages has been 1.75 percent. Last week, the spread was 2.83 percent. That means a homeowner's mortgage costs are more expensive now than they have been.
Investor Trust
The Fed lowered its target for federal funds 13 times from Jan. 3, 2001, to June 25, 2003. After each cut, mortgage costs fell eight times and rose five times, according to North Palm Beach, Florida-based Bankrate.com.
That has little to do with Fed policy and everything to do with the confidence of investors, who aren't buying securities backed by home loans, said Kenneth Rosen, chairman of Rosen Real Estate Securities LLC, a hedge fund in Berkeley, California, and chairman of the Fisher Center for Real Estate at the University of California, Berkeley.
``No one wants to lend much of anything today,'' Rosen said. ``The secondary market system for many loans has broken down. People don't trust the paper. We have an investor strike going on.''
The Fed this week agreed to make $200 billion available to securities firms by lending Treasuries in exchange for mortgage- backed securities because many private investors have quit buying mortgage-backed bonds. Record home foreclosures sent premiums on Fannie Mae and Freddie Mac-backed securities to the highest in 22 years this month.
Emergency Financing
That may worsen further as JPMorgan Chase & Co. and the New York Fed agreed yesterday to provide emergency financing for 28 days to Bear Stearns. The New York-based securities firm, the second-biggest underwriter of mortgage bonds, said its cash position had significantly deteriorated. The Dow Jones Industrial Average fell 1.6 percent.
``Banks are trying to increase their reserves to get through this period where we have greater uncertainty, and also uncertainty about future losses,'' said Delores Conway, director of the Casden Real Estate Economics Forecast at the University of Southern California in Los Angeles. ``They are being much more careful.''
Home-loan issuance will drop by 15 percent this year, in part because lenders can't sell mortgages on the secondary market, according to the Washington-based Mortgage Bankers Association.
Rates Are Set
Buyers are less willing to take a risk on purchasing after U.S. home prices fell year-over-year in 2007 for the first time since the Great Depression, according to the National Association of Realtors. This year, they will probably drop 5 percent nationally, according to Freddie Mac, the second-largest provider of U.S. mortgage financing.
``The mortgage rates are set in the securities market more than they are by the banks,'' said Michael Carliner, former chief economist for the National Association of Home Builders.
The yield premium, or spread, on 30-year fixed-rate mortgage securities sold by Fannie Mae over 10-year notes reached 238 basis points on March 6, the widest since 1986. The spread was 207 basis points yesterday, compared with an average of about 112 basis points the past five years.
The spread helps determine the interest rates offered to homeowners on new prime mortgages.
TED spread
The difference between what the U.S. government and companies pay for three-month loans has also climbed in the past month. The so-called TED spread increased to 1.52 percentage points yesterday from 0.78 percentage point on Feb. 14.
The Fed has lowered its benchmark rate five times since September, to 3 percent from 5.25 percent.
The median price of an existing home fell 13 percent in January from its peak in July 2006, according to the Chicago- based National Association of Realtors.
``The Fed actions are not going to stop house prices from falling,'' said Morris Davis, a former Fed economist and professor of real estate at the University of Wisconsin- Madison's School of Business. ``In an environment with falling prices and defaults, mortgages are a lot riskier now than three years ago. In an environment where housing prices are falling you should expect spreads to widen.''

Rates Conundrum

Rates are still great- but we get asked alot - why aren't they any better

Read this article better understanding -


March 6 (Bloomberg) -- Credit trading models used by Wall Street have gone haywire, raising company borrowing costs even as Federal Reserve Chairman Ben S. Bernanke cuts interest rates.
General Electric Co. is one of five U.S. companies rated AAA by both Standard & Poor's and Moody's Investors Service, making its ability to repay debt unquestioned. Yet when the Fairfield, Connecticut-based firm sold 2.25 billion euros ($3.35 billion) of five-year bonds last week, its annual interest payment was $17 million higher than on a sale nine months ago.
Borrowers from investor Warren Buffett's Berkshire Hathaway Inc. to Germany's HeidelbergCement AG face the same predicament. Yields on $5.12 trillion of corporate bonds tracked by Merrill Lynch & Co. average 2.05 percentage points more than U.S. Treasuries, the most since at least 1997.
The higher costs are an unintended consequence of securities that allow investors to speculate on corporate creditworthiness. So-called correlation models used to value them have become unreliable in the fallout from the U.S. subprime mortgage crisis. Last month some showed the odds of a default by an investment- grade company spreading to others exceeded 100 percent -- a mathematical impossibility, according to UBS AG.
``The credit-default swap market is completely distorting reality,'' said Henner Boettcher, treasurer of HeidelbergCement in Heidelberg, Germany, the country's biggest cement maker. ``Given what these spreads imply about defaults, we should be in a deep depression, and we are not.''
Hedging Losses
The problem started in the second half of last year when subprime mortgage delinquencies started to rise, causing investors to retreat from complex instruments such as synthetic collateralized debt obligations, or packages of credit-default swaps that became hard to value. The swaps are contracts based on bonds and used to speculate on a company's ability to repay debt.
As values of CDOs began to fall, banks that had sold swaps underlying the securities started to buy indexes based on them instead, a method of hedging their losses on portions of the CDOs they owned. The purchases are driving the cost of the contracts higher, raising the perception that company bonds tied to the swaps are suddenly riskier and leading investors to demand higher yields throughout the corporate debt market.
The Markit CDX North America Investment-Grade Index, a gauge of credit-default swaps on 125 companies from Wal-Mart Stores Inc. to Walt Disney Co., has more than doubled since the start of the year to a record 177.5 basis points as of 12:21 p.m. today, according to Deutsche Bank AG. The index dropped to a low of 29 in February last year.
Undermining Bernanke
The $1.5 trillion CDO market is undermining Bernanke's attempts to lower borrowing costs. The Fed cut its target rate for overnight lending between banks by 2.25 percentage points to 3 percent since September, and even debtors with the safest ratings are paying more. Money-market rates for euros and pounds climbed to the highest since mid-January yesterday, signaling the global squeeze on short-term bank lending may be returning.
The financing unit of GE, the world's most prolific borrower, sold the 4.875 percent five-year bonds last week at a yield 1.29 percentage points higher than similar-maturity government rates, Bloomberg data show. Last May, the company issued 750 million euros of 4.375 four-year notes at a spread of 0.27 percentage points.
The additional expense stems from credit-default swaps tied to GE's bonds. Their cost climbed to a record 165 basis points on March 4 from 12 points a year earlier, according to CMA Datavision in New York.
Broken Models
Banks bought more contracts on indexes containing GE's swaps after CDO pricing models broke down, sending the so-called default correlation to more than 100 percent last month from 60 percent in July, according to research from Zurich-based UBS.
The programs, which computed the value of the highest-rated portions of CDOs, implied that all companies in the CDX index would default if just one did. Banks often hold these senior tranches after arranging the CDOs for investors.
``The banks that have been using correlation to calculate their risk will have to go back to scratch,'' said Janet Tavakoli, president of Chicago-based Tavakoli Structured Finance. ``By using correlation models as the main means of risk management, the engineers threw out sound banking practices.''
Investors have shunned all but the safest government debt since subprime mortgages roiled credit markets. Seven-year CDOs tied to investment-grade swaps have lost almost 18 percent of their value since June, according to data from New York-based JPMorgan Chase & Co.
Compounding Declines
The mathematical breakdown is compounding the decline by creating a vicious circle. As the cost of the swaps on the CDX index increases, the models signal a greater risk of defaults, and vice versa. A bank holding $100 million of the highest-rated portion of a swap-based CDO now has to buy $60 million of swaps to maintain its hedge against losses, JPMorgan said. A year ago, it would have had to buy $10 million.
``The recent unwind and activity in that market is also causing activity in our name,'' said GE spokesman Russell Wilkerson. Swaps linked to GE's financing unit are included in 67 percent of European CDOs, more than any other company, according to S&P.
Before the subprime collapse, the burgeoning CDO market had the opposite effect. Increasing demand for the underlying assets helped lower U.S. corporate bond yields to 1.28 percentage points over similar-maturity government notes in February 2007, the smallest spread since 2005, indexes from New York-based Merrill show. Synthetic CDOs pool swaps, while others package loans or bonds.
`Key Factor'
``It's the key factor that brought spreads to irresponsibly tight levels up to the end of the second quarter of last year,'' said Nigel Sillis, director of fixed-income and currency research at Baring Asset Management in London. ``Now we're seeing the reverse, except that the impact is far more negative than it was ever positive.''
One way to make the models useful again is to reduce the amount banks expect to recover from defaulted bonds to 30 percent of face value from 40 percent, according to analysts at UBS and New York-based Citigroup Inc. Banks would still have to buy more default protection though, keeping the pressure on borrowers.
``The unwinding of structured credit is eating away at the fabric of the corporate bond market,'' said Suki Mann, a credit strategist at Societe Generale SA in London. ``The increase in credit-default swaps is making it far too expensive to borrow.''
To contact the reporters on this story: Abigail Moses in London Amoses5@bloomberg.net; Hamish Risk in London hrisk@bloomberg.net; Neil Unmack in London at nunmack@bloomberg.net

Stimulus Package and Rates

It appears we are on the threshold of new loan limits - if the stimulas package gets to and is signed into law by President Bush - then the new conforming loan limit will be around $730,000. This is of course great news for homeowners in our area, especially if there are not "hits" to rate for these new loan limits. Stay tuned...

On the rate front - what an incredible season we are in economically - we have really seen the impact from the global markets impacting federal treasury rates/bond rates and thus indirectly mortgage rates. Generally, you can follow the 10 year bond and get a good idea of what is happening to mortgage rates and yet what in interesting season we are in - as an example = immediately after the emergency 75 basis point reduction in the federal funds rate we saw the 10 year at 3.25 - and today after an additional 50 basis point reduction and the anticipation of further fed cuts we see the 10 year at 3.70 - and thus mortgage rates are actually higher today than they were for a few hours on the day of the emergency rate cut. So what gives - I am not an economist, but it comes down to supply and demand for the 10 year and the fears of what the long term implications of these rate cuts will be on the economy.

Bottom line - rates are still incredibly low and there appears to be good news on the horizon - maybe the problem is that they are not as low as we had hoped.

Rich

Federal Mortgage Rate Freeze Program

There are a lot of questions that still surround this program - who will qualify, what's involved, etc. The contact number for the group administering the program is 1-888-995-HOPE.

In many cases, especially if you have equity in your home, refinancing is the best option. If you have an adjustable rate mortgage and would like to explore your options, you can call us at 888-780-8781. We'd love to help you walk through the process.

Karen

What's My House Worth

Most of the recent problems in helping people with a mortgage are centered on values. So if you are wondering what your house is worth visit this website for a general idea of the value of your property. http://realestate.yahoo.com/Homevalues

There are 4 basic pillars of obtaining a mortgage
1. Value - Expressed as Loan-To-Value(LTV) - your total mortgages compared to the value of your property.

2. Credit - Expressed by a score provided by the three credit bureaus.

3. Income - Expressed as Debt-To-Income(DTI) - your total gross wages compared to total household debt.

4. Assets - your total liquid cash - bank accounts, 401K, investments, etc.


Most people that I talk to recently, have good credit and decent income but their value does not allow a new mortgage at this time. So visit the website listed above to get a good idea of your homes value - but remember, only an appraisal will give your homes true value.

Rich