A Few Quick Reminders:
- FHA Rates Are 1% Lower – in some cases: This is a quick reminder that FHA’s interest rates can be as much as 1% lower than Fannie Mae’s conforming rates – particularly for borrowers with large loan amounts, small down payments and/or lower credit scores.
- Hot Markets/14-Day Closes: Despite all the buyers sidelined by higher rates and/or concerns about the housing market, we are still seeing bidding wars. This is just another reminder that our 14-day closes often push our clients’ bids over the top.
- Rates Still Very Likely to Drop: Despite the recent rate increases and all of the bluster by the Fed and the media about our hot economy and more rate increases, there is still a 95% chance that rates will fall significantly. This is because the hot employment numbers are misleading, leading economic indicators are very weak and at 2007 levels, China’s reopening was somewhat of a dud, and inflation readings will continue to improve (a weaker economy and lower inflation portend lower rates). In the near term, Barry Habib expects mild improvements in mid-March, as updated employment and inflation data surfaces. Longer term, Barry expects a much better improvement on May 10th, when the inflation data for April is released. Barry sets much of this out in this short IG Video. This is very important because rate drops will spark more buyer demand and allow current buyers concerned about rates to refi.
Mortgage Banks Can Broker Too (JVM Can Access the Broker Channel)
“This buyer’s situation is unique, so I think I need to send this buyer to a broker because they have more options…”
I have heard agents tell us something like that numerous times over the last ten years, and our response is always the same: We can broker too!
I often reference my blog about the three primary mortgage lending channels: 1. Commercial Banks/Credit Unions; 2. Mortgage Banks; and 3. Brokers.
JVM Lending is in the mortgage banking channel, where we underwrite loans and then fund them with our own warehouse line of credit before selling them on the secondary market soon after funding.
BUT – what I often fail to explain is that we (mortgage banks) have full access to the broker channel too.
When we broker a loan, we act just like any other loan officer in the broker channel. We package the loan and send it off to a “wholesale lender” (a lender that services the broker channel) to underwrite and fund the loan with its warehouse line.
In these situations, our role is limited to “origination” (taking the application, collecting all loan docs, pre-approving and educating the buyer, locking the rate, and doing some disclosures) and processing the loan (working with wholesale lender’s underwriters, collecting additional conditions, coordinating borrowers, agents and escrow officers).
Why Would We Broker?
We broker loans in two situations: (1) if a wholesale lender happens to be offering particularly low rates at any given time, and we want to take advantage of those rates; and (2) if none of the investors that buy our loans offer a particular type loan, such as a loan that uses bank statement deposits for income or a loan that uses only rental income for income.
Why Do Mortgage Banks Not Want to Broker?
Mortgage banks prefer to keep loans “in-house” when possible for several reasons: (1) they can control the process, and ensure loans close in a more timely manner; (2) their internal rates are lower – which is often the case because “wholesale lenders” have to add in their own margins which usually make their rates higher than internal mortgage bank rates; and (3) capital markets pickups. Capital markets pickups are the additional gains that mortgage banks make when they sell their loans on the secondary market. Among other things, these gains come from selling servicing rights or from just selling the loans for more than they expected to when the loan was locked.
Some major mortgage banks prohibit their loan officers from brokering altogether because these capital market pickups can be significant and because the mortgage banks do not share them with their loan officers.
But, at JVM we can broker loans any time we’d like, and to almost any wholesale lender we’d like – and we will always simply do whatever is best for our clients.
Ironically, JVM actually has far more options than brokers because we have 100% access to two channels: brokering and mortgage banking.
Jay Voorhees
Founder | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167
