The reason for this post is to make Veterans who are using their VA benefits (to either refinance or purchase a home) aware of the current mortgage market environment. The Trump election and Fed Chair Yellen’s recent comments created some major changes that you need to be aware of.
In mid 2016 mortgage rates dove to all time lows with Great Britain’s decision to leave the European Union. (aka “BREXIT”)
Due to this global event millions upon millions of Americans decided to refinance all at once causing appraisers, underwriters and lenders to be absolutely buried.
Service levels and turn-times suffered at just about every mortgage company in the USA.
Not to mention this is all done under an environment which we call “lending in 2016” with Dodd-Frank, TRID, CFPB and countless other regulatory hurdles making it very difficult to lend.
When I first started in the business in 2000 the pendulum was in the middle (common sense), in 2005 it swung to the left where anyone with a pulse could get a mortgage and in 2009 it swung to the right where someone with $1million dollars in the bank with an 800 credit score couldn’t get a loan. Today, in the mortgage industry the pendulum is on its way back to the middle but is still about half way between where no one can get a loan to save their life and common sense. We have a little further to go but the good news is that things are moving in the right direction.
The reason I tell this story is because I know sometimes lenders ask you for things that don’t seem to make sense or make you drop everything to sign a date sensitive document. Lenders don’t do this to make your life difficult, we do this because we have to adhere to strict timelines according to the new TRID mortgage regulations. I know this can be especially difficult during the holidays.
Our mission is simple: take care of our clients! What does “take care” mean? It means taking the time to actually care and treat our clients as if they are our only client – not like a number. Of course our rates are very very competitive but what really sets us apart is our VA expertise and not treating our clients like a number. When we care we are able to get 5-star reviews, referrals and most of all we are able to give back to Shelter to Soldier. We are not perfect by any means, but one thing is for sure – we always do the right thing and we always deliver.
Now that we’ve established that 1.) millions of people tried to refinance all at once due to BREXIT, 2.) “lending in 2016” isn’t easy and 3.) we truly care about you – please help me, help you.
Here is where we are today: Mortgage interest rates have gone up anywhere between 1/2% to 1% higher than when you originally locked your loan due to the presidential election and due to the Federal Reserve chair Yellen raising the federal funds rate yesterday as well as stating that they will most likely raise it 3 more times in 2017.
Meaning that if you were to lose your lock or if you were to decide to put your loan on hold until after the new year your rate would be 1/2pt-1pt higher.
For example, let’s say you locked in a $450,000 VA 30yr fixed loan at 3.25% that same rate today would be 4.25% or higher. Losing your lock in this scenario would cost you $92,284~ in interest over the life of the loan. Is it worth almost $100,000?
I want to give you advance notice that most lenders out there (including us) cannot pay for any lock extension fees. Lock extension fees occur when we have to extend the lock due to delays. Lock extensions reduce your lender credit that you receive thus increasing your closing costs. Delays occur when documents are not signed and acknowledged by both parties, appraisal inspections are rescheduled or delayed, pest problems, supporting documentation is not turned in, and/or you fail to cooperate. Remember, this is a team effort. If we do not extend your rate you will lose it and you will be subject to the prevailing market rate. As you can imagine lock extensions are expensive as lenders continue to lose money while they are holding your rate for you.
I bring this to your attention because we have had a small percentage of our clients lose their interest rates because they did not cooperate. Now that interest rates are up they are looking for someone to blame. They got complacent and thought that the artificially low rates would last forever. Remember, we like to “take care” of our clients – we don’t like unhappy and angry clients. Trust me if you lose your rate you’d be unhappy too. Don’t let it happen to you! I want to ensure that if anyone didn’t properly and clearly explain locks and lock extensions with you that you now are fully aware. Through this communication we will avoid surprises.
I urge you to work with your Loan Officer to expedite your file and to ensure it is on track. The holidays are here but we need to continue to work hard and ensure your loan funds at the rate you locked it at.
To a Happy and Prosperous New Year!
William Lyons, CEO Griffin Funding