Financial Update by Maurice Soussé

Rates are a tad lower this week and the bond market is closed today for Good Friday. The 10 year yield is hovering at 3.4% which is down about .20 basis points overall. The Philadelphia Federal Reserve showed its manufacturing activity index diver to 18.5 this week. They were expecting a number of 33. This means that productivity in manufacturing was down a bit.

As we have mixed numbers come in and out of the various reports, you can see the fight between the markets wanting interest rates to rise and the reality of production, employment, etc that just won’t allow it to happen. We hope to see rates continue to be low as we enter the frenzied summer buying season.

On a good note, we have a super investor that actually is bringing some common sense back into the marketplace. They offer some true niche lending that can help many of your buyers by bucking FNMA’s rules and offering the following:

Cash Recapture – don’t wait!

Cash recapture is a nice feature for a borrower who bought a property and owns it free and clear. Often a property becomes available for such a good price, that a savvy borrower will buy it with cash to ensure they get it at the price offered. Now they want a loan to get their cash back…and they want it now.

  • We permit cash recapture anytime following the purchase…there is no waiting period (i.e., no 6-month waiting period).
  • The sales price must be used as the value of the house unless 12 months have passed since the purchase. If 12 months have passed, the we can use the current appraised value.
  • Investment properties are limited to 50% LTV.
  • Interest Only is optional to 60% LTV.
  • Minimum loan amount is $300,000.

Property Listed For Sale May Be Excluded From DTI…
Both Mortgage Payments Not Required in DTI…

Your borrower wants to buy a new house and sell their existing home. They have their existing home listed for sale but it hasn’t sold yet. Every lender is requiring both mortgage payments be included in the DTI. Guess what? Yep, we’ll allow you to exclude the existing mortgage payment from the DTI:

  • Minimum loan amount on the subject property is $300,000.
  • The existing home must be actively listed for sale in the MLS.
  • Borrower’s reserves must include 18 months PITI + 12 months of all other payments, i.e., car payments). Some areas may require more reserves. For example, if the home is in an area where the sale of homes is traditionally much slower, then the underwriter might require more reserves.
  • Interest only available to 60%.
  • Asset Depletion Qualification is permitted.

Asset Depletion & Pledged Assets

  • Depletion of Assets – underwriting tool designed to assist a borrower who has assets but is falling short on DTI – it provides more qualifying income by calculating a return on the borrower’s liquidable assets.
  • Pledged Asset Program – borrow $5,000,000 or more with only 10% down (and no MI) by pledging assets to offset required down-payment.

These rules will help to qualify some borrowers that would NOT qualify through traditional means. Let me know how we can help your borrowers this week.

Have a blessed Easter.