target rate

Fed just concluded their 2 day meeting and as expected they kept the Fed funds rate the same but in their announcement they indicated no rate hikes for the rest of 2019 and they downgraded the economy outlook from 2.2% to 2.1% GDP. Keep in mind that the White House has been saying GDP will be at 3% so there’s a huge disconnect there. Inflation is totally muted both here and abroad.

In regards to the balance sheet for the Fed they indicated that in May they will only let $15 billion in Treasuries fall off the balance sheet and reinvesting the other $15 billion into treasuries (they are currently letting around $30 billion a month fall off the balance sheet so basically as of May they will cut that in half AND by Sept or October they will stop reducing their balance sheet on both treasuries and mortgage backed securities.

$20 billion in mortgage backed securities currently being run off each month until Sept or October so no reinvestment into more MBS.

Mortgage backed securities are rallying big time right now and the 10 year treasury is down to 2.54%.

If you have a question about mortgage rates or loans in general please schedule a consultation by clicking HERE.

Mitch Lichterman – Loan Originator-TargetRate.com
Phone:310-478-4999
NMLS#:274609
DRE#:01952045
Email:Mitch@TargetRate.com <mailto:Mitch@Okolia.com>
GA #56363
WY #MBL-3140

Conforming Limits Increase.

The Feds have announced a new rate increase for conforming loans and it’s the biggest increase I can ever remember.

Conforming loan max:  $484,350 (from $453,100)
High Balance loan max:  $726,525 (from $679,150)

What this means is that the lowest rates available on 30 year fixed rate loans are now extended to loans all the way up to $484,350.  Also, the second best rates available on high balance loans are extended as well.  High Balance loan limits are based on zip code.

You can start submitting applications for purchase or refinance now.   If your loan is bigger than the posted limits.  Don’t worry. We have aggressive rates for loans up to $3,000,000.

To discuss your confidential loan scenario please CLICK HERE to schedule an appointment or email Mitch@TargetRate.com.

We have this new 2nd TD program that is great for almost any borrower.  Loans to 500K and combined loans to 2MM.

Up to 95% for purchases.  100% on refinances.  This is unheard of to go 100% loan to value.  Must have 720 or higher FICO.  Owner or Second home only and Full Doc.

This is a great way to pull cash out or consolidate debt.

To discuss your confidential loan scenario please CLICK HERE to schedule an appointment or email Mitch@TargetRate.com

As you can see from this chart, the 10 year Treasury has finally maintained a level below 3% for the first time in months.  This is obviously good for long term borrowing rates.  The yield curve is now pretty flat, which generally means a slowdown is coming.  If the Fed moves up on short term rates, the yield curve may become even flatter or inverted.  What happens after this????  Short term rates come back down eventually.  Long term rates typically move up only when the yield curve is normal, but short term rates are very low.  Long term rates typically never move up when the yield curve is flat or inverted.

WHERE ARE MORTGAGE RATES TODAY?

Generally, it depends on LTV ratios.  The cheapest money is always related to lower LTV ratios and high debt yields (NOI / loan amount), which result in higher DSC ratios.  Only FHA multifamily and senior housing rates do not price differently at maximum LTV ratios (up to 85% for non-cash out transactions.)

Here is what we have seen in the market:

Current FHA rates fixed for 30 years is 4.30%, approximately 140 basis points over the 10 year.  These spreads (rate over the 10 year treasury) were quite tight at the beginning of the year,  but have widened significantly, particularly as the 10 year as moved back down 40 basis points.

Insurance rates fixed for 10 years range from 130 basis points to 170 basis points over the 10 year treasury, depending on the LTV ratio and market.  This results in the underlying rate at 4.375% to 5%.    Smaller deals (below $5 million), will increase pricing by approximately 30 basis points.  The spreads were thin in April.  I stated this about spreads in our April 2018 market update.  “The spreads are thin and have not yet begin to widen.  That will change soon.  Just look at investment grade bonds (BBB and better).  As of today the yield is 4.25%.  It is easier and less risk to buy a liquid 10 year bond than invest in a loan asset that yields less.  Spreads are widening in all sectors, and it will happen here as well.”  THEY DID.  We also saw corporate bond spreads increased as well.

FNMA and Freddie Mac Mortgage rates are approximately 200 to 240  basis points above the 10 year treasury.   There are non agency lenders quoting 180 basis points over the 10 year Treasury, which is quite attractive.  Both FNMA and Freddie Mac spreads have widened as the 10 year has declined.

Please let us know if you need any market information or would like to have a conversation with us.  We welcome conversations and will provide invaluable information and service to you.  HAPPY HOLIDAYS AND MERRY CHRISTMAS!