Where R Rates / MBS Market Update
BIG MBS UPDATE
Did you miss me? I missed you guys. In case you did not get my message. I take the last two weeks of every year off to refresh my mind and take a break from writing and to prepare myself for a great new year.
So, what happened since my last morning update? What happened over the Christmas season? My last MBS update was 18 days ago on Thursday December 19th.
Since many of us departed for the Christmas Holidays the markets have pretty much stayed in the same trading window with only a slight change in rates from what they were when we checked out for a couple weeks to last Fridays close.
Anywhere from pricing being better by $30 per 100K in loan size for some conventional loans and $100 worse in pricing for the same rate per 100K in loan size for some govt loans depending on where you are on the rate sheet.
A big increase we saw was in the 10 Year Note which is what our mortgage backed securities compete with. That increased from a yield of 4.38 to a huge 4.59 seeing a 21 BPS increase in yields. We typically would see much worse rates in this scenario although we did not get hit as hard as the 10 Yr Note did.
According to my chart the DOW got better by 389 points since December 19th. Do not get too excited about that though. If you go back to December 6th (one month ago) the DOW is down 1,910 points which is a huge loss at the end of the year. You may want to hold off checking your 401-K and investments if you get jittery around investment changes : )
THIS WEEK we have a pretty big week on the news front. Today, we have Global PMI (Purchasing Managers Index) at 9:45 this morning which gives a future outlook of what is happening in the manufacturing sector. This is derived from 40 different economies across the globe focusing on GDP, Inflation, exports, capacity, employment and inventories. Overall the economic health across the globe. As a reminder what happens globally happens to our markets as well due to we are a very large source for global investments.
Tuesday is the big JOLTS (Job Openings & Labor Turnover Survey) report which tells us what is happening in the labor market from openings to layoffs to those quitting their jobs. Wednesday we have ADP which is a big jobs report as well as the release of the FOMC minutes (Federal Open Market Committee) aka “The FED” which will give us all of the details from their last meeting that investors and markets like to dissect.
Then Friday we have all of the payroll and labor earnings reports. The labor market is a key indicator of the health of our economy and a potential big mover of mortgage rates depending on how they come in.
All that to say. Don’t worry about the markets. Get yourself in gear for the new year and go make happen for others with what you have today. I will keep you up to date of what’s happening in the markets. Stay tuned ……
| LAST TWO WEEKS CONV 5.5% – DOWN 7 CONV 6.0% – UP 3 GOVT 6.0% – DOWN 10 10 YR NOTE – UP 21 TO 4.59 DOW JONES – UP 389 |
| SO FAR TODAY CONV 5.5% – DOWN 6 CONV 6.0% – UP 3 GOVT 5.5% – UP 0 GOVT 6.0% – UP 0 10 YR NOTE – UP 3 TO 4.62 DOW JONES – UP 106 |
GREEN is GOOD for Rates – RED is BAD for Rates
Product & Guideline Highlights
TRANSFER TO LLC
We all get the question from borrowers if they can purchase a home in the name of their LLC because their CPA says it is a good idea.
It is actually a great idea if the agencies allowed it. When purchasing a home in an LLC name that means a business is purchasing the home. If a business is purchasing a home then that makes it a commercial loan. Fannie and Freddie do not do commercial loans on investment properties.
That does not mean they cannot hold title to their property as an LLC. It just means they cannot refinance or purchase a property in the name of an LLC.
Up to June 1st of 2016 it was not allowed to be transferred after closing and they actually had a clause that says they could call the loan due if they did transfer the title. The document that gave them away was the annual insurance dec page being sent and it was in an LLC’s name.
These days Fannie and Freddie do allow you to transfer title in to an LLC’s name after closing and if you want to refinance you must transfer it back prior to closing a refinance. Seasoning requirements are not hindered by LLC title transfers.
HERE ARE THE CAVEATS
The original borrower(s) must be the majority owner of the LLC on the title. Also, classified as the managing partner. In addition, all original borrowers must be members of the LLC of which at least one must be majority owner on Freddie Mac loans. Fannie does not specifically state all borrowers must be on LLC. Fannie does specify they must be the majority owner of the LLC.
One of the problems I see is someone transfers title to an LLC post purchase. They are in partnership with someone else in a 50/50 ownership and the other person is not going on the loan. In this case it does not work due to the borrowing owner is not a majority owner of the LLC.
The question comes up about primary residences. Can you put a primary residence in an LLC after closing? The answer to that question is yes, IF they have occupied the property for 12 months.
There is a clause in every Note or deed that states you intend to occupy the property as a primary residence for the first 12 months of the loan. After which, you are eligible to do whatever you like with the property. Therefore, on a primary you must wait 12 months. On an investment property you can do it right after closing.
This would be good information to send out to your investor realtors and clients.
Jackism of the Day
HERE FOR MEMORIES
I was watching a movie last night and I heard a profound statement. It was either from the movie Interstellar or Furiosa, A Mad Max Saga. Both decent, yet long ones.
The comment was “We are just here to be memories for our kids”.
That one made me think a little bit. The part that made me really think about it is if we were to truly take that statement to heart when we are interacting with our kids or whomever. Then how would that change our actions when we are with them?
I have a 25 year old daughter and 28 year old son, so I am an empty nester and we are beyond the teenage years of daily interaction. Although, my children only live 20 minutes away and they live together. I still talk to my daughter daily, my son fairly regularly and we see them quite a bit so we are still influential in their lives.
For you, this may mean you have some in diapers, or elementary, middle, high or college. And some of you may have 25 or 28 or 40 year olds still living in your house. YIKES! : )
Regardless of what age or living situation we have. We are still making memories for our kids. Every memory evokes an emotion and adds to the millions of moments that make us who we are. The moments that mold us in to the person we become and the memories we are going to have spoken about us when our kids are up front giving our eulogy as we prepare for eternity after our earthly death.
How would we change our actions if we knew our cause in each moment was to create a memory that they could live by as they grow older?
How would we change our words, our actions, our thoughts on a specific matter. How much less would the little things matter and how much more emphasis would we put on the big things that stand the test of time.
Think about your last interaction with your kids? Whether it was this morning or last week. If you viewed it as a lasting memory in their life. How did the memory go and how did that memory play out in their eyes? Not just ours, what about theirs?
One of my favorite things to do in my marriage is to pray over my wife each morning and write her a love letter. When I am praying over her sometimes I will do a check up to see how I am doing. I close my eyes and I picture myself in her body. As she awakes I look through the eyes of what she sees. When she gets out of the bed what does she see?
As she moves around the house and walks in to my office. What is my reactions? How do I respond when she enters the room. When she is downstairs what is she thinking about? Have I done something that makes her smile when she sees it? Have I done the things that I know she appreciates and receives as love or have I left a mess somewhere, or put up my finger and say just a minute and never follow up. Do I say words that saddens her heart or do I say words that lift her up.
Experiencing your spouse or kids through their eyes is one of the most revealing things we can do to experience what they are experiencing. As I write her morning love letter each morning. I think of what happened the previous day. I look for what she did that made her wonderful and amazing. it is the small things. How she preps and presents a meal or that she always refills my little creamer packs and organizes them in a pretty manner. How she maintains our household and when she does something special for a neighbor. That is what I write about in my love letters to just say thank you for being mine.
Whether you pray over your spouse or kids through their eyes, write them a love letter or do one of the 100’s of special things that you do out there for your spouse or kids. Today, look at it through the lens that each moment is about making a memory that will benefit their future. That will benefit your future. That will leave a trail of memories that they will always have to go back and to visit any time the opportunity comes.
Memories last a lifetime and they also make a life worth living. May the memories you make today be for those that are impacted by them for a lifetime.
