Category: Lending (page 27 of 56)

by Brian Brady

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Why, if the Federal Reserve Bank is keeping rates at nearly zero, are mortgage rates rising from their August lows?

Try to imagine that mortgages are cheeseburgers and it starts to make sense.  Imagine that the mortgage industry is a lot like the fast food/casual dining industry and it makes even more sense.  In my last post here, I tried to give you some background on securitized mortgage lending (aka as ‘nearly every dammed loan being funded today‘) but just think of mortgages like cheeseburgers.

If you want a cheeseburger, you have lots of choices:  Big restaurant chains (like In N Out) sell cheeseburgers, as do big franchised networks (like McDonalds and Burger King) and tens of thousands independent “burger joints” in every burg across our fruited plain.

Now, imagine that there was a “Federal Meat Provider” which set the wholesale price of meat to make cheeseburgers.  A health crisis hit so the Federal Meat Provider dropped that price of meat to a stupendously low figure so everyone could eat.  Subsequently, the chains, franchisees, and independent operators dropped the retail price of a cheeseburger to an historically low price.  Predictably, people were lined up at every burger restaurant in the country, waiting 5 hours to get that cheap burger.  What would you do if you owned a restaurant?

Hire more people so you could sell more cheap burgers and (hopefully) retire when the Federal Meat Provider raised the price of meat again, right?

Well, it’s not that simple.  There are new rules about selling cheeseburgers and those new employees have to be trained.  Moreover, while the Federal Meat Provider is trying to keep cheeseburger costs low to help people during the health crisis, the various State Employment Agencies won’t let the burger restaurant owners hire just temporary / part-time employees without added costs and regulations.  Add in that the local School Board wants to levy higher taxes on burger restaurant owners.  On top of those problems, nobody really knows when the Federal Meat Provider will raise the wholesale cost of meat so it’s hard to predict demand beyond a 3-6 month time frame.  At a certain Read more

by Brian Brady

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

One of the most consistent of the “old school mortgage bloggers” is Rhonda Porter in Seattle, writing over on The Mortgage Porter.  She offers no-frills information about mortgage markets, the kind of straightforward advice homeowners need.  Her blog is almost 15 years old.

I wanted to advise current homeowners why they should not accept the mortgage forbearance program, unless they drastically needed it and regret that I didn’t back in March.  The mortgage forbearance program was offered as a “no penalty”  break for homeowners– ask to suspend your payments and it’s automatically granted without any hit to your credit score.  While that part was true, many of my past clients found out that nobody would refinance their loan to a lower rate while they were in forbearance (it kinda makes sense, right?)

Fannie/Freddie offered specific guidance a few months ago; I’ll let Rhonda explain it:

Fannie Mae and Freddie Mac offered clarity with their new guidelines this week. If you currently have a conventional mortgage, it is a Fannie Mae or Freddie Mac mortgage. Basically, if you opt for the forbearance program that’s being offered due to covid-19, then you may not be able to get a new mortgage until you have have made three months of on-time mortgage payments. If a borrower has stayed current with their mortgage, they may still be eligible for new mortgage. There may be some variances with this depending on what type of forbearance program you have entered into as well as lender underwriting overlays.