Colorado Home Mortgage Loan

My Colorado Home Mortgage Rate is about to adjust.  What does that mean and what should I do?

The full impact of a Colorado Home Mortgage that has an adjustable rate tied to it really depends on the type of Colorado Home Mortgage you have.  The most popular adjustable rate programs used over the last six years were the subprime loans.  These Colorado Home Mortgage Programs were designed to get high risk borrowers into homes at a rate normally just low enough to qualify.  The adjustable rate period for these loans ranged from 2 years to 3 years.  They are known in the mortgage business as two/twenty-sevens or three/Thirty-eights.  They were designed to adjust every 6 months until the rate hit the market cap rate, which is around 11%.  Pretty scary for anyone that currently has these Colorado Home Mortgage Programs.  These loans are designed so that you have to refinance after the 2 or 3 year grace periods.  If you do not refinance your Colorado Home Mortgage, you can expect your rate to jump up 2% every 6 months until it hits that Market Cap rate.  So if you had a 5% rate on this loan it would jump up to 7%, 9%, 11% respectively over time. 

The 2^nd type of Adjustable Rate Mortgages offered in the market has far less risk tied to it, and as a result, the adjustment periods are a bit friendlier.  FHA and Conventional A-Paper Colorado Home Mortgage programs have an Adjustable Rate Mortgage Option.  These Rates typically adjust only once per year and will not exceed 1% per year during that time.  This option will give most Colorado Home Mortgage clients the ability to refinance when it makes sense to them.  For example, we have several clients that got into an ARM Colorado Home Mortgage program at 3.875%.  This is a great rate and they have it locked for 5 years.  In year 6 that Colorado Home Mortgage will be set to adjust.  The adjustment can only go up 1%, therefore making the highest rate available for that year set at 4.875%.  That rate is still better then the 30 year rate currently being offered.  Year number 7 the rate could go to 5.875%, assuming worst case scenario. Again that rate is right in line with what is being offered on 30 year fixed rates.  

Much of the publicity circling around adjustable rate mortgages comes from media outlets.  These media outlets will only report the most negative aspects of the business.  A tornado hits a small town what do you see, 3 trailers hanging from a tree.  You know what I am talking about and the point I am trying to make is that you need to understand what type of Colorado Home Mortgage you are getting yourself into.  There are benefits from an Adjustable Rate Mortgage when it is done right.  Those clients that have been in their house for 5 years at 3.875% will attest to the benefits that they had.  There are so many right reasons to do an Adjustable Rate Mortgage, however the biggest wrong reason is for qualification purposes.  Many of the subprime lenders now out of business qualified these Colorado Home Mortgage programs with the lower teaser rates in order to get people approved.  What they did not do is analyze the impacts created by the adjustment for these buyers.  These borrowers were put in a position where they could no longer afford their payments at the higher interest rate levels.  This has caused many Americans to fall into Foreclosure status.

So now that we have talked about what the Adjustable Rate Mortgage is, we will focus on what you should do.

Option 1:  Refinance Your Home

Utilizing a premier Colorado Home Mortgage broker, you can get access to all programs that are available to you, not just the programs offered by that bank.  The most popular refinance for those borrowers that took out a subprime loan is a FHA Colorado Home Mortgage.  The FHA option allows for a little more risk then the conventional A-Paper loan option.  The Higher risk also allows for a higher loan to value ratio.  This is big as most Colorado Home Mortgage programs face home value issues.  You do not need much appreciation on your home to qualify.  In fact you only need 3% if you have not refinanced before, and 5% if you have.  If the rate creates payment obstacles for you and new 5 year adjustable rate mortgage might be the solution.  FHA Colorado Home Mortgage ARM products are far less volatile then subprime ARM products.  The reason that I recommend the 5 year option as a qualifying option is that it will allow you an additional 5 years to get your current situation back on track.  This is the most feasible option available for people who are not happy with the adjustment that is about to take place on their Colorado Home Mortgage program.

Option 2:  Let your Rate adjust and continue paying.

I stated above that some adjustments are not bad.  Colorado Home Mortgage programs that only adjust once a year at a rate of 1% a year may still offer a lower rate then what the market currently offers.  In these circumstances it is best to wait and refinance only when the market hits a low point.  Colorado Home Mortgage programs should be designed to meet both your current and future needs.  Refinancing should only take place when it makes sense for your long term objectives.  Many people looking to refinance their current Colorado Home Mortgage Program do so because it saves them $200 a month today.  Then they sell their home a year later.  The cost of the refinance will set you back much more then the savings you get over the next year.  Your net proceeds from the sell of that house will be far lower then the savings your received from the refinance.  So refinancing your Colorado Home Mortgage should only take place when it makes sense to do so.  Talking to your Colorado Home Mortgage broker and asking for amortization schedules will help you make that decision.

Option 3:  Sell your Home

Not the most popular option, but if you find yourself in a situation where you can no longer afford your payments selling your home will be the best option.  Hopefully you have some equity to make the sell of the home complete.  However if you are upside down on your home like many of us are, you can also go into a short sale situation.  You should contact a professional Real Estate agent to answer your short sale questions.  Colorado Home Mortgage loans have been adjusting for many people in a way that makes it impossible for them to continue making payments.  Circumstance arise that may have contributed to these obstacles, but putting your home up for sale and eliminating the threat of continued Colorado Home Mortgage rate hikes may help you save money over the long term.  

I hope that you found the information helpful, if you are looking for current Colorado Home Mortgage market updates you can check out my market blog at www.coloradomortgagebanking.com/news

I am here to help you and I would be pleased to earn your business.  If you are someone you know needs my assistance please don’t hesitate to call me directly.  My goal is to be your Colorado Home Mortgage provider for life.

Daniel   

Colorado Home Mortgage Rates appear to be on their way down today based on what the Mortgage Backed Securities market did today.  We had a variety of economic reports released which finally moved Colorado Home Mortgage Rates down for the 1^st time in about 10 days.  Inflation continues to be the primary concern for investors and was certainly a major concern expressed by the Federal Reserve in the last week or so.  We now have all the inflationary data in for the month of May, and it appears that the Federal Reserve may have over stated the inflation problem, at least for the moment.  Colorado Home Mortgage Rates began to improve a bit after Producer Price Index figures came in line with expectations.  The Federal Reserve has expressed its concern for higher inflationary pressures, but the data so far indicates that inflation is in line with expectation no major surprises.  Colorado Home Mortgage Rates have been climbing based on the expectation that Inflation reports would come in considerably higher then the current consensus put in place.  So far it appears the investors are getting closer to what true inflation is as apposed to the Federal Reserves current expectations. 

The Federal Reserve will need to watch that it does not express too much hype in relation to the information they release, otherwise they may loose some credibility in the market.  Obviously when the Federal Reserve speaks the market listens, but this over communication policy may create market gaps for the Federal Reserve, versus desired market movement.  Allen Greenspan had a history of keeping information close by and releasing the information at times of relevancy.  Colorado Home Mortgage markets reacted very quickly when the information came out, because the information was relevant to what they intended to do.  The Federal Reserve expressed concern over the last week or so, indicating that they would take steps to combat inflation.  They went as far as insinuating that a short term interest rate hike would be needed to slow down inflationary pressures.  This type of communication in the market would have definitely lead to an interest rate hike in the next Federal Reserve meeting, however Bernanke’s approach appears for the moment, to cry wolf with no actual action.  Will this benefit his creditability in the future?  Probably not.  Colorado Home Mortgage rates have always drawn its movements from market action, and anyone trading in MBS knows that reacting first can make the difference in their portfolios bottom line.  The Federal Reserve is a tool for investors and they count on that to be accurate and predictable.  I know that we have been used to one way for a long time, and who knows, maybe Bernanke’s new approach will pay off.  So far it appears that investors are left confused and frustrated by the lack there of, in the predictability of the Federal Reserves current action plan. 

Colorado Home Mortgage rates reacted to four economic reports: PPI, Core PPI, Housing Starts, and Industrial Production.  Listed below are the actual data report figures and their impacts on the Colorado Home Mortgage Rate market.

Producer Price Index reports on inflationary pressures between business to business and typically involves overseas transactions.  These inflationary numbers will outline global inflationary pressures and pressures brought into our domestic consumer numbers.  The index showed a 1.4% increase which was a little higher then the 1.0% expert consensus which investors had hoped for.  Normally that would have created some issues for Colorado Home Mortgage Rates, however after all the fears tied around inflation, it was not the surprise everyone was preparing for.  Core Producer Price Index which takes out the highly volatile Food and Energy components actually only increased by .2% which was exactly what investors were hoping for.  This information sent a vary strong sign that inflation is still a bit higher then what investors would like to see, but not the catastrophic issue the headlines played them out to be.  Overall the news was positive for Colorado Home Mortgage Rates.

Housing Starts came in just below 1 million its lowest level since 1999.  This may be a result of the Home Builders Associations current sentiment readings released yesterday, which indicated major concern by builders on the state of the housing market.  Fear of inventory drives down inventory supplies and as a result lowers the number of home permits being issued.  Colorado Home Mortgage rates will also react positive to this as investors look for safer investment opportunities during tough economic times.  The consensus was that housing starts would be around 980K and the actual Housing Starts came in at 975K.  Not a big difference, but keep in mind housing permit activity is always higher in the summer months which make the drop even more significant.  This will be monitored by the Colorado Home Mortgage rate market, but should not make a big difference on what Colorado Home Mortgage rates will do.

Finally, Industrial Production numbers were released.  The consensus on the Industrial Production numbers was for a 0.1% advancement in production, but the actual data indicated a -0.2% drop.  This was significant and helped move Colorado Home Mortgage Rates back down.  Industrial Production numbers currently measures the change in the production of the nation’s industrial industries as well as a measure of their industrial capacity.  The level of industrial production divided by the level of industrial capacity gives the capacity utilization rate. The manufacturing sector accounts for one quarter of the economy and is weighted heavily in predicting economic growth.  Stronger economic growth typically leads to higher inflation which is bad for Colorado Home Mortgage rates.  What is hard to compare on a report like this is how much of a production increase is good.  With economic numbers coming in at zero or below it seems that anything tied to economic growth leads investors to fear inflation.  This trend seems to be more prevalent today then ever before.  Economic growth is a part of our economic evolution and some growth is needed however it appears that any growth causes Colorado Home Mortgage rates to increase out of fear. 

We have a long way to go before investors begin to react in a predictable manner, but in the mean time please call me with your Colorado Home Mortgage questions.

Daniel

We saw another .25% hit on Colorado Home Mortgage Refinance Loan rates sparked by another day of inflation talk by the Federal Reserve.  Inflation seems to be a very hot topic and will create issues for Colorado Home Mortgage Refinance Loan rates until something else makes the headlines.  For two days now members of the Federal Reserve have been commenting on the state of the economy and have expressed very clearly that inflation remains their top priority.  Fisher the southern states representative on the Federal Reserve Board is known for his tough stance on inflation, but yesterday Bernanke continued the trend by reaffirming his position on inflation.  The mortgage backed securities market went on a selling spree and have not stopped in the last 48 hours.  We have seen some of the sharpest increases in Colorado Home Mortgage Refinance loan rates for the year.  Most lenders are offering Colorado Home Mortgage Refinance loan rates in the 6.5% range and if you have not locked in yet you may want to talk to your lender to see if the rates quoted 10 days ago will still be honored.  It is hard to make a FLOAT or LOCK recommendation on your Colorado Home Mortgage Refinance Loan rates today especially when the market is acting so irrational.

Global fears should be a real concern in the market today and should be monitored especially if it’s impacting your Colorado Home Mortgage Refinance Loan rates.  We should remember that much of the impacts are based on speculation about inflation not facts.  Not that I don’t think it is warranted, but none of the hard data being reported on inflation appears to be out of line.  Investors should come back to terms with their fears once we have more economic data to report on.  Colorado Home Mortgage Refinance Loan rates may improve as investors jump back in the market to buy at a bargain.  Obviously if this happens we may see some slight improvements in Colorado Home Mortgage Refinance Loan rates. 

The only Economic report coming out today was the trade balance which came in right in line with expectations.  The report had very little impact on what the market did.  Increases seen today with Colorado Home Mortgage Refinance Loan rates came from the continued upward spiral created by comments made earlier this week by the Federal Reserve.  We are probably not going to see much relief in Colorado Home Mortgage Refinance Loan rates until Friday the 13^th, which will be when or next Core inflationary report comes out.  Consumer Price index is expected to be released on that day which will give investor a much needed piece of the puzzle to determine whether Colorado Home Mortgage Refinance Loan rates will go up or start coming back down.

Right now we believe Colorado Home Mortgage Refinance Loan rates are set too high, but heck if you told me gas would be $4 a gallon 6 months ago I would have thought it to be highly unlikely as well.  Investors are driven on emotion and every investor appears to be fearful that the next person knows more then they do.  Investors being the lemmings they are will reaction to what everyone else is doing. The tendency in the market is to sell when everyone else is selling, and buy when everyone else is buying.  Colorado Home Mortgage Refinance Loan rates will react up or down Depending on what action investors are taking in the market.  Right now everyone is in a sell mode which has created an upward movement for Colorado Home Mortgage Refinance Loan rates.  How far it will go and when it will slow down is hard to say.  What can be said is that if the next couple economic reports come in as expected, then Colorado Home Mortgage Refinance Loan rates will settle down.  If the CPI report comes in like last month which was better then expected, we will see some rapid improvements in Colorado Home Mortgage Refinance Loan rates.  LOCKING now will have you locking at this year’s highest interest rate lock.  I believe that the trend will continue over the next week or so but not to the extent felt over the last two days.  We may see some of the conservative price approaches used by investors today lighten up.  This would relieve some of the upward trends being realized in the Colorado Home Mortgage Refinance Loan markets today.  Friday the 13^th can be a day of horrors or a day of reckoning.  My only fear is the superstitious tendency for that day, which is normally bad news, but everything else tells me things will improve and I will remain with my FLOAT recommendation.  If 6.0% is on the table taking it would be your best bet, but right now I don’t believe it is an option on your Colorado Home Mortgage Refinance Loan rate.  We do have other options to look at.  Does 5.375% appeal to anyone?  You should ask me about that one it may be the Colorado Home Mortgage Refinance Loan program you are looking for.

Daniel

Colorado Home Mortgage Loan rates take another hard hit today.  New and old concerns related to inflation continue to make the headlines and Colorado Home Mortgage Loan rates are reacting negatively towards it.  The only major economic report released today were the Pending Home Sales numbers which came in considerably higher then expected.  Colorado Home Mortgage Loan rates already impacted by inflationary concerns saw an even greater loss when the report was released.  Colorado Home Mortgage Loan rates jumped up about .25% today and about .5% since last week.  Most Colorado Home Mortgage Loan lenders have hedged their pricing to a point where Locking just does not make sense.  The fear hear is how bad will inflation be, and to what extent will it play in the Colorado Home Mortgage Loan market.  Most experts believe that Colorado Home Mortgage Loan rates will continue to rise on concerns that inflation will increase due to the continued price increases related to oil.  So if you are closing in the near future and have not Locked in a rate then LOCKING may be a good idea.  I would recommend a LOCK today at 6.0% if you can still get that rate.  Colorado Home Mortgage Loan rates do have some room to drop especially if investors regain some confidence lost during current inflationary concerns. 

Colorado Home Mortgage Loan rates are impacted by economic conditions.  One condition not mentioned in awhile, but appears to be a perfect explanation to the economic status of our country today is “Stagflation”.  Colorado Home Mortgage Loan rates always do well during bad economic times, but mixed in with inflationary pressures Colorado Home Mortgage Loan rates have no other direction to go then up.  Stagflation is an economic condition first proposed back in the 1970’s.  It is controlled by two principal contributors inflation and economic slow downs.  We are currently experiencing both these conditions and should be talking about managing our decisions based on lessons learned during our last “Stagflation period”.  Colorado Home Mortgage Loans are greatly impacted by monetary policy.  Monetary policy is controlled by the Federal Reserve.  The Federal Reserve has two major concerns on their hand, Inflation and decreasing economic growth.  Depending on what policy the Federal Reserve implements can and will create a negative influence on the policy not being enforced.  For example if the Federal Reserve fights inflation then they will jeopardize stimulating economic growth.  Like wise Federal Reserve policy to stimulate economic growth will negatively impact inflation.  Kind of a damned if you do and damned if you don’t. 

Colorado Home Mortgage Loan rates also react positively or negatively depending on the policies being implemented by the Federal Reserve.  If the Federal Reserve combats inflation Colorado Home Mortgage Loan rates will react positively.  Likewise several techniques used to stimulate economic growth, like increasing the money supply will have a negative result on Colorado Home Mortgage Loan rates.   Stagflation was last felt during the late 1970’s, and though the Federal Reserve recognizes the issues on hand, they are conflicted on how the resolve the issue.  Fishers concerns on inflation lead to a steep increase in Colorado Home Mortgage Loan rates today and appears to be his biggest concern, however Bernanke and the other Federal Reserve Board members all feel Economic stimulation should be their primary concern.  This is why we are seeing Colorado Home Mortgage Loan rates increase and it is also why we are in the making of another possible “Stagflation Period”. 

As I stated before Stagflation can result when and economy is slowed by an unfavorable supply shock, such as an increase in the price of oil hear in the U.S. As inflation increases Economic conditions tend to worsen.  When the Economy faces times of uncertainty and an obvious decrease in production monetary policy is used to kick start the sluggish economy.  When the Federal Reserve jumps in and begins to increase the supply of money they increase the pressure centered around inflation.  As a result inflation increases even more.  The increased inflation causes Colorado Home Mortgage Loan rates to go up. Stagflation only becomes a problem when the marginal impact on Policies used to combat the economic issues cause more harm then good.  Generally the Federal Reserve can either stimulate the economy or attempt to rein it by adjusting interest rates making it cheaper to borrow money.  Adjusting the rate down tends to improve growth but it also increases the pressure on inflation. Adjusting the rate up tends to fight inflation but it hinders economic growth. During periods properly described as stagflation both problems co-exist. Major economic conditions of unusual proportion will have already created near-crises on both fronts before stagflation can set in.  I don’t have a solution to where Colorado Home Mortgage Loan rates will go but our government needs to improve on policy decision especially during such a fragile moment in time.  Let’s not have history repeat itself or we may find our unemployment rate hit 10% and Colorado Home Mortgage Loan rates will hit 10%.

Now with that said, I am confident that the Federal Reserve will do the right thing for the best long term results.  Now we may not like what they are doing, but so far they have shown no signs of repeating bad economic decisions.  Especially over supply issues in the money supply.  Call me with your Colorado Home Mortgage Loan questions and give me a chance to help you find the right Colorado Home Mortgage Loan.

Daniel 

Colorado Foreclosures are at an all time high.  These Colorado Foreclosures have followed the same statistics found in many other markets throughout the U.S.  So in short we are not experiencing anything that is not in line with national averages.  However, we are experiencing some of the worst Colorado Foreclosures ever recorded in Colorado History.  There are many reasons for the Colorado Foreclosures.  I will try to break some of these reasons down for you today.  The first and most obvious reason for Colorado Foreclosures is that Home owners are not making their payments due to economic hardships.  Loss of employment for one or both members of a house hold will play havoc on their ability to make payments.  This is really self explanatory and based on the state of the economy we are seeing many households faced with this issue.  Colorado Foreclosures have always had these factors contributing to its statistics, but there are even bigger issues going on.  Colorado Foreclosures are experiencing new phenomenon’s in the industry with the adjustments of the once popular Adjustable Rate Mortgages or ARM’s. 

There are many types of ARM products available and not all ARM products are bad.  The issues that Colorado Foreclosures are facing are the Subprime ARMS commonly know in the business as 2/28 or 3/37.  These programs were designed to force homeowners to refinance after 2 or 3 years.  We called these band aid loans because when the adjustment period starts it will actually adjust 2% every 6 months until it hits the market cap rate around 12.5%.  You can see why Colorado Foreclosures were impacted so quickly.  Home owners that got into a 5.5% 2/28 program actually jumped up to 7.5% and 9.5% before the 3rd year ended.  Colorado Foreclosures spiked because homeowners had to make payments that got out of control.  As I stated before these programs were designed to get out of after the 2 or 3 year period but something held them back.  What held them back was the fact that homes were not appreciating to a point where refinancing was possible.  FHA home loans require a minimum of 5% equity in the home and were designed to be the loan these clients got into after the adjustment period began.  Colorado Foreclosures and bad economic conditions forced many homes on the market and with the supply so high Home prices tanked.

Colorado Foreclosures began to see more and more homes entering into Colorado Foreclosures status.  Homes were not maintaining the value needed to qualify for a new loan and interest rates were adjusting out of control.  Home owners were faced with a decision; continue making a payment they can’t afford or stop making payments all together.  If they choose to stop making payments the home owner was able to save the money needed to get into a rental property shortly before the official Colorado Foreclosures took place.  It is clear why so many people are electing to go into Colorado Foreclosures when the only repercussion was that they had to move.  I can’t blame just the homeowner in this situation.  Mortgage Brokers failed and Lenders failed by allowing such loose standards in underwriting the homes.  Ultimately these brokers and lenders were the primary contributors to the number of Colorado Foreclosures being put on the market today.  A lot of money was made by everyone involved.  These individuals choose income over doing what was right for the industry and the consumer. 

Realtors were simply pricing homes for what the market would allow so they probably could have seen what was happening, but ultimately are the least likely to blame for Colorado Foreclosures running as high as they are.  Brokers and Lenders top my list of who to blame for Colorado Foreclosures being where they are.  Lenders for allowing bad credit individuals to qualify with debt ratios so high that any increase of payment would send the consumer out of control.  They knew what these loans would do and should have seen that Colorado Foreclosures would be the result.  Brokers who used aggressive appraisals to qualify people on over inflated properties and failing to educate their consumers on the repercussions of the loan they were getting into.  Can you imagine a broker that would push an unethical appraiser to value a home 25% above the actual value and then put their client into a loan they could barely afford knowing it would go up by 2% every 6 months two years later?  On a $200,000 loan the payment went up over $250 a month and $500 a month in the 3^rd year. These loans had no other outcome to be had but to have them enter into Colorado Foreclosures.  These brokers should be prosecuted and the Lenders fined to a point where their ability to do business goes away. 

The reason I feel so passionate about holding people accountable is that WE ALL PAY for these mistakes.  We pay in the sense that our homes are not appreciating the way they should.  We pay in the taxes that are given to these lenders in Federal Aid or Cheaper bailout money issued in Treasury bills.  We also pay in the losses suffered in portfolios that were tied to the perception that the paper sold in these portfolios were in a risk category not expected to default.  When Colorado Foreclosures spiked the people that bought these mortgage backed securities suffered greatly and even had some people loosing their entire portfolios.  The money in these portfolios were counted on for retirement, College funds, health care, and so on.  So the question to ask yourself when thinking about Colorado Foreclosures is that when World Com, Enron and Adelphia all committed billions of dollars in fraud to their investors, people were held accountable and some of these individuals were prosecuted.  So why is it that the Trillions not Billions that were lost in Mortgage Backed Securities not getting the attention that these companies had.  Just like Enron and World Com people were defrauded and many people lost their entire savings and retirement plans.  Yet because the guilty pool is so big no one wants to hold them accountable.  It’s sad and at this point I don’t have an answer, but Colorado Foreclosures will always be an issue when there are no measures to hold people accountable.  We at 1^st Metropolitan Mortgage are passionate about our client’s welfare and want to make sure that what ever loan you get into does not result in Colorado Foreclosures in the future.