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BAD DAY FOR BONDS
We took a hit yesterday morning and never really recovered from it yesterday.
Make sure you monitor the rate sheet especially for conventional loans and know which coupons are being hit the hardest.
As a general rule of thumb I take the coupon and add .75% to that to begin to compare how a specific coupon is impacting the rate sheets.
For example, yesterday the 5.5% coupon (6.25%ish rate sheet) lost 50 BPS. The 6% coupon lost 31 BPS and the 6.5% coupon lost 19 BPS. This means your day got hit a bit, got hit hard or just got ugly depending on where you were pricing loans.
Same goes for your FHA, VA and USDA loans. The 6% coupon lost 28 BPS and the 6.5% (low 7’s on rate sheet) lost 50 BPS.
The reason for the losses yesterday were the trifecta of the impact from the great Friday jobs report showing strong job growth, then Fed Chair Powell went on 60 minutes Sunday talking about the debt situation which is not good for bonds because we are that debt or we compete with that debt plus he stated not lowering rates any time soon. Then the third whammy was the ISM report came in which is purchase managers index and said purchasing expense has increased significantly.
That means inflation in the business side of the world. Combine inflation with bettering jobs means rates stay high for longer.
These are just a few indicators so do not let it ruin your day and you keep doing you. We have more reports coming and hopefully they can sway in our direction.
If you receive my morning texts my apologies as I have sent them and they show sent but I believe the carriers are blocking them for the most part due to how they are reading them. Hopefully you will begin receiving them again today at time of morning rate sheets.
Product & Guideline Highlight Knowledge That Gives You An Edge Over Your Competition
MANUAL UNDERWRITING RATIOS
I do a lot of manual underwrites for FHA, VA and USDA. When someone asks me what my niche is I say government underwriting.
In today’s market and higher interest rate environment I think we have all experienced tougher loan files that need creativity and know how to provide mortgage financing for those who qualify and deserve to be in a home.
One of the most common questions I get is on DTI ratios for manual underwrites so I figured I would chat about this today.
FHA RATIOS
The standard manual underwrite FHA ratio is 31/43. The 31% is your front end ratio also known as your housing ratio and the 43% is when you put all of your monthly debt in and divide by your gross income.
If you have a no score or less than a 580 score you cannot go higher than 31/43. If you have a borrower with a score and a co-borrower with no score you CAN use the alternate DTI options.
If you have compensating factors you can go above the 31/43% ratios.
1 Compensating Factor = 37/47 ratios.
2 Compensating Factors = 40/50 ratios.
If mtg is only debt & no other open debt but has score = 40/40 ratios.
Compensating Factors Are:
3 months cash reserves from their own funds.
Passes residual income test.
New housing payment not more than $100 or 5% of current housing payment.
New construction homes with EEH energy codes.
VA RATIOS
VA manual underwriting ratios will vary by lender. Some lenders max at 41% as that is where VA requires additional residual income.
VA does not have a posted max ratio for manual so it is lender discretion.
Flagstar uses 50% as the standard for max manual ratios but will consider a higher amount based on the situation. For example, if a Veteran is selling a home after they purchase this one and we are hitting them for both mortgages and they have plenty of assets and good credit then we would likely go higher. Or proof of a spouses income we are not using that would make sense as well. It depends on the story line but our standard is 50%.
USDA RATIOS
USDA standard manual ratios are 29/41.
USDA has what they call a debt ratio waiver. If you meet below requirements you can go to 32/44 ratios.
You Need The Following
680 or higher score for all borrowers
PLUS 1 Of These Three
– 3 months cash reserves from their own funds
– All employed borrowers have been on current job for 2 years. Allowed for SS or retirement as well. S/E not eligible.
– Minimal increase in housing payment
Fyi, if the file requires non-traditional credit then you cannot use the debt ratio waiver.
Share this information with potential clients and referral partners to show you are in the know and a great source to those who may not be in the know.
Jackism of the Day Truths and Thoughts that make you go hmmm
POWER OF PATIENCE
Patience is one of two attributes that can change the world. The second one is kindness.
Most good things in life come from the willingness of people to pursue patience and kindness.
Can you recall when you have these moments of inspiration and find you are patient with others? How when something bad is happening or someone is throwing some negativity your way and you respond in a positive way to them. How much that changes the situation.
How you are slow to anger and you truly spend some time thinking of what is happening in another persons life vs automatically responding based on what is going on in your life.
I did a challenge one time and spent a few weeks driving the speed limit every time I drove. It was amazing the way I experienced driving. I was in no rush, I actually looked around and enjoyed my surroundings, I had better conversations with my wife just because we were in a patient mode of enjoying the ride with no fear of looking over our shoulder or finding a way to make a pass.
There is no greater place for patience than in the home with your spouse and children as well as in the work place. Being around an impatient person is annoying and puts everyone around in a tough situation.
Patience is a choice to control your emotions vs allowing your emotions to control you. When confronted with a wrong rather than returning to them what they deserve instead you respond with discretion and respect even when they don’t deserve it.
The biggest benefit is while others are going through external storms in their life that are reaching out to impact your life. When you have genuine patience regardless of what is happening on the outside you are given the ability to have an internal calm and peace which is a quality of life so few have.
Anything worth doing in life needs to be done on a daily basis. Being or acting in a specific way requires consistency to make a difference. The good disciplines, routines and habits that you desire and that you succeed in must be resupplied every single morning. Think of the good things in your life that you use each day to live a better life. Then each morning remind yourself of these items and restock them in your mind and in your heart to live them out another day.
Do a gut check and look at how you usually respond to your spouse, your kids, your co-workers, your AE’s and your underwriters. If you were to ask all the people you encounter each day how you respond to them what would they say?
Are you a joy to be around? Do you exert patience and wisdom or do you retaliate when you are wronged or impatient when something does not go your way. Would you want to be around you?
There are many ways that impatience rears its ugly head but one of the major ways it happens is through our words. Here is a challenge for the day or for the week. I do this regularly and you would be amazed at how it changes your day and others.
Try to spend the day or days and not say a single negative thing about anything to anyone. Spouse, kids, co-workers, clients, community. Nothing negative to nobody. I promise your day will be far greater than you may think. If you do, please let me know what you experience.
