Carrington Mortgage Services, LLC (CMS) is pleased to announce effective Monday, July 15, 2019, the Carrington Advantage (Flexible Advantage/Advantage Plus and Investor Advantage) programs will offer a new Interest-only product option. Interest-Only loans offer borrowers lower monthly payments by allowing borrowers to pay only the interest during the 10 year interest-only period. Once the interest-only period ends, borrowers must begin making principal payments to pay off the debt.
The new Interest-only product has the following features:
- Terms Available: 5/1 ARM-IO, 7/1 ARM-IO, and 10/1 ARM-IO
- Doc Types: Full Doc, 1-Year Alt Doc, 12 or 24 Month Bank Statements
- 5/1 Caps = 2/2/5 (Initial cap at 2%; Interim cap at 2%; Life cap at 5%)
- 7/1 and 10/1 Caps = 5/2/5 (Initial cap at 5%; Interim cap at 2%; Life cap at 5%)
- Margin = 3.50% (Flexible Advantage Plus), 5.00% (Flexible Advantage)
and 6.00% (Investor Advantage)
- Floor = Start Rate
- Index = 1 Year LIBOR
Interest-only Qualifying Payment
Interest-only loans qualify using the fully amortized payment calculated over the fully amortizing period, based on the greater of the note rate or the fully indexed rate to determine qualifying PITIA. For example, a 30-year loan with a 10-year interest-only period would have a 20-year fully amortizing period (see guidelines for details).
- Loan Amount: $400,000
- Interest Rate: 5.75%, Full Indexed Rate 6.75%
- 5/1 IO ARM
- Principal and Interest to Qualify borrower = $3,041.46 (Fully Indexed Rate over 20 Year Amortization)
- Loan Amount: $250,000
- Interest Rate: 7.25%, Fully Indexed Rate 6.75%
- 7/1 IO ARM
- Principal and Interest to Qualify borrower = $1,975.94 (Interest Rate over 20 Year Amortization)
View the Guidelines here.
Please Note: All Interest-only Terms are amortized over 20 years for qualification and have an Interest-only period of 10 years regardless of the fixed period of the ARM.
Last Week in Review: Goldilocks Scenario for Housing Continues…
The housing market is enjoying a great 2019 and the good times are poised to continue. We are seeing home price gains slow to a healthier level and at an equilibrium with wage growth. Consumer and business confidence remain at multi-decade highs, unemployment rates are at 51-year lows, stocks are at all-time highs, and thanks to slowing economies abroad and low inflation … the Fed is expected to cut interest rates at the July FOMC meeting. Couple all of this great momentum with home loan rates just .50% above the best levels ever, and you have a Goldilocks housing scenario for the foreseeable future.
This is great news for those who are thinking about refinancing an existing property or purchasing a new home.
This past week financial markets around the globe traded in a bit of a calm sideways pattern ahead of arguably the most important economic event of 2019 — the US/China trade talks at the G20 meeting.
Depending on when you read this newsletter, the headlines may already be out as talks between President Trump and China’s President Xi are to take place on Saturday, June 29th.
How the trade talks go could have a major impact on global economies and even determine whether the Fed cuts rates, which at the moment is widely expected to happen in late July.
So, if you are looking to buy a home or potentially refinance an existing one, it’s hard to overstate the magnitude this event can have on rates for the foreseeable future.
At the moment we are watching the 10-Year Note yield hover near 2.00%, which has served as a psychological barrier preventing rates from moving lower. How the US/China talks go could very well determine which side of 2.00% the 10-Year Note trades.
Why is this important? Because if the 10-Year Note yield moves lower and beneath 2.00%, it will push Mortgage Bond prices higher and home loan rates lower still. The opposite is also true.
Bottom line: home loan rates are within .50% of the best rates ever and there is a very real chance we might see even lower rates in the very near future … like next week.
The Carrington Mortgage Services, LLC (CMS) Lock Desk will be closed Thursday, July 4, 2019 for Independence Day, which is a Federal Holiday and also Friday July 5, 2019 for a Company Holiday. In addition, the lock desk will close early (10:00 AM PST) on Wednesday, July 3, 2019. Normal lock hours will resume on Monday, July 8, 2019.
Locks that expire on the holiday will automatically roll to the next business day. In addition there are some important disclosure considerations associated with the holiday:
- Thursday, July 4, 2019 cannot be included in the rescission period for refinance transactions.
- Thursday, July 4, 2019 cannot be included in the seven (7) business day waiting period between the date the initial Loan Estimate (LE) was provided to the borrower and the consummation of the loan
- When re-disclosure of the LE is required, Thursday, July 4, 2019 cannot be included in the four (4) business day waiting period between the date the revised LE was provided to the borrower and the consummation of the loan.
- When re-disclosure of the CD is required, Thursday, July 4, 2019 cannot be included in the three (3) business day waiting period between the date the revised CD was provided to the borrower and the consummation of the loan.
Issues related to locks should be sent via email to firstname.lastname@example.org.
Big Pricing Improvement with our Non-QM Loan Programs
The team at Carrington Mortgage Services is extremely excited to announce some big changes to our Non-QM pricing:
Carrington Flexible Advantagesm:
- LLPA’s improved .25% (Full Doc and lower FICO loans) – see the matrix
Carrington Flexible Advantage PLUS:
- Base price improved .375% – across the board – see the matrix
Carrington Investor Advantage:
- Base price improved by 100bps across the board! – see the matrix
- Increased max price from 101 to 102.25
- FICO x LTV LLPA improvements across the broad
- Prepay Buy out – reduced from 1.5 to1.25
- Reduced DSCR bands to help simplify your pricing scenarios
Last Week in Review: Rate cuts are coming
This past week the Federal Reserve, aka “The Fed”, held their June meeting and as expected, left rates unchanged.
However, they said some key things which helped both Stocks and Bonds move nicely higher, with rates touching the best levels in 21 months.
The Fed removed the word “patient” in their Monetary Policy Statement to describe their monetary policy approach. This means they will react quickly with a rate cut and not be so “patient” in the future.
They also cited many “uncertainties” that may require a Fed rate cut — slowing global economies, trade and disinflation.
One part of the Fed’s dual mandate is price stability or inflation, and with inflation moderating the Fed wants to do what it can to “allow” inflation to rise — they see cutting rates as a measure.
So now, financial markets are fully expecting a rate cut at the July 31 meeting.
Bottom line: a Fed rate cut is designed to keep the economy from falling into a recession. This coupled with the best rates in nearly two years is a wonderful story as summer officially begins.
Last Week in Review: The rate decline stalls
What a difference a month makes.
In May, stocks fell sharply, and interest rates declined each week. June has been a different story. The Fed has signaled rate cuts are likely coming. Stocks have been rallying higher, and the decline in interest rates has stalled.
The Fed can’t control home loan rates. Those move mainly on inflation and expectations of inflation in the future. Inflation has remained tame for the past decade and is the main reason why home loan rates have stayed low as well.
This past week, we received another reading on consumer inflation, the Consumer Price Index (CPI), which confirmed there are no price pressures or inflation threat to the economy.
The result: the odds of a Fed rate cut have climbed to 85% for the July Fed Meeting on the idea that the Fed can comfortably cut rates and “allow” inflation to creep into the economy.
Also keeping home loan rates near two-year lows is the uncertainty and lack of resolution with the US/China trade turmoil. The next step is a potential meeting between US and China at the G20 Meeting June 28-29. Mark your calendar. This is an important event, because as this trade dispute goes so do the economies around the globe.
Bottom line — we are seeing a strong economy, rising stocks, and two-year lows for home loan rates.
To confirm the value determination for Carrington Advantage Product (CFA, CFA Plus, and Investor Advantage) loans with amounts of $1 Million and greater, effective June 17, 2019, Carrington Mortgage Services, LLC (CMS) will implement the following new appraisal requirements. These requirements apply for all loans received in Loan Set-Up (LSU) on and after the June 17, 2019 effective date.
When the new loan amount is greater than or equal to $1.0 Million CMS will require the following:
- Two full appraisals are required.
- Appraisals must be from different AMCs and must use different Appraisers.
- The second appraisal should be ordered once the loan file is approved.
- A CMS Underwriter will condition for the second appraisal.
- A Collateral Desk Review (CDA) is not required when a second appraisal is ordered.
Carrington thanks you for your business.
Last Week in Review: Fed cuts and home loan rates
For the sixth consecutive week home loan rates declined, once again fueled by the ongoing trade tensions between the US and China.
However, the decline in rates was halted on the notion the Fed is likely to CUT rates soon. Huh? That’s right — a couple of Federal Reserve members were speaking this week and suggested that the time might be right for a Fed rate cut.
How come home loan rates didn’t improve further upon news? When the Fed cuts or lowers rates, they can only lower the Fed Funds Rate, which is an overnight lending rate between banks. The Fed doesn’t control home loan rates.
When the Fed cuts rates it is doing so to fuel economic growth and/or allow inflation to rise — both of these are bad for long-term rates like home loan rates. Additionally, Stocks love Fed rate cuts and moved nicely higher midweek, taking money out of Bonds thereby limiting their decline in yield or rates.
The ongoing trade tensions and slowing growth around the globe may very well continue to push home loan rates lower in the weeks and months ahead — but we must now pay attention to the Fed who will look to “help” the Stock market from further declines by cutting rates. And anything that helps Stocks is usually not great for home loan rates.
Bottom line — we are staring at 2-year lows in home loan rates and the time could not be much better to lock in on a purchase or refinance loan.
EFFECTIVE JUNE 17, 2019
As a reminder, in an effort to improve our services, Carrington Mortgage Services, LLC will transition to lender disclosed initial disclosure packages on new loan applications submitted on or after June 17th 2019.
At that time, we will no longer be able to accept broker disclosed loan packages.
With this change, we expect:
- Faster turn times
- No more broker paid cures
- Less compliance risk for brokers
- Fewer hard stops in loan set-up
If you have any questions about this policy change please contact us.