With many on fixed incomes, there is scant “extra” money to pay off credit cards and other debt, take care of home repairs or perhaps pay out the ex in a silver divorce.

Because few want to touch their once-in-a-lifetime 3% first mortgage to pull cash out, home equity lines of credit or fixed-rate seconds are options worth a look.

More on loans: How a bridge loan can help homebuyers avoid contingency

But those types of loans often come with rigorous income standards, which will prevent certain older Americans from qualifying for a second mortgage.

But there may be an easier way — a no-payment-required reverse second mortgage. The loan is the first I’ve found by a reverse lender, and full disclosure, it’s a company I do business with. I’m sure there will be similar reverse second mortgages in due time; there always are, in my experience.

More on housing: Southern California home sales drop 43% in 2 years, biggest decline on record

Here are some of the basics from Finance of America Reverse LLC:

—Qualifying is based on a complicated residual monthly income (what’s left over) formula, family size and region of the country. Regardless, it is certainly a lower threshold than a home equity line of credit or fixed second because there is no monthly payment to factor.

—Unlike the FHA reverse mortgage, the home equity conversion mortgage, all borrowers (husband and wife, for example) must be at least 55 years old. Like the standard reverse, the maximum loan amount is calculated, in part, based on the date of birth of the youngest borrower.

Also see: Southern California home prices defy ‘brutal year’ for real estate

—Borrowers never make a payment on the reverse second. But of course, nothing is free. The loan balance negatively amortizes, meaning it grows each month based on a fixed, 9.99% interest rate.

In other words, the balance of the reverse mortgage is still owed. Heirs likely would walk away from the property, since there is no recourse on the second loan. The first mortgage lender gets paid off first in a foreclosure sale. The reverse second bank or loan servicer takes the property back as a loss.

To be clear, there is an open question of whether the first lien has recourse. What if the sales price doesn’t clear the lien on the entire first mortgage balance along with the second? It’s best to speak with an estate attorney for clarity.

Also see: 1 million Southern California homes have long-term flash flood risk

FHA has a provision in its reverse mortgages in which the balance owed to the lender is 95% of the sales price, if the property is upside down (whatever the property sells for). The other 5% is to provide space for the heirs to pay real estate commissions and closing costs.

For example, let’s say a senior outlives the actuary table estimate. The reverse loan balance is $1 million, but the property sells for $900,000. The FHA lender would be owed $855,000 to clear the lien. The FHA mortgage insurance fund would absorb the $145,000 balance.

—The minimum loan amount is $50,000 and the maximum is $4 million.

For condo buyers: Freddie Mac unveils tool to help clear condo financing reviews faster

—The more equity (property value minus the first mortgage) the bigger the opportunity to pull out cash. This program recognizes property values up to $10 million, minus the first mortgage loan balance.

In contrast, the FHA first lien reverse maximum property value can never exceed $1,149,825.

Owners of expensive properties may be better off leaving their existing first in place (with its required payment) and getting a reverse second instead of refinancing into an FHA reverse.

On down payments: Can you buy a home with nothing down? FHA has zero-down loan

To qualify, the minimum middle FICO for all borrowers is 600

Single-family residences, condos and even two-to-four-unit properties are eligible so long as it’s the borrower’s primary residence and will always be their primary residence.

A HUD-approved independent pre-application counseling agency class is mandatory. Generally, it’s a 45-minute phone call with all borrowers. The cost is anywhere from zero to $150.

Here is one example: The youngest borrower is 56 years old with excellent FICO scores. The home is worth $1.475 million. The existing low-rate first mortgage balance is $538,000. The borrowers can receive a maximum reverse second of $113,425 and never make a payment on the second for the rest of their lives.

Freddie Mac rate news

The 30-year fixed rate averaged 6.64%, 1 basis point higher than last week. The 15-year fixed rate averaged 5.9%, 4 basis points lower than last week.

The Mortgage Bankers Association reported a 3.7% mortgage application increase compared with one week ago.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $766,550 loan, last year’s payment was $261 less than this week’s payment of $4,916.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 5.625%, a 15-year conventional at 5.5%, a 30-year conventional at 6.125%, a 15-year conventional high balance at 6.125% ($766,551 to $1,149,825 in LA and OC and $766,551 to $1,006,250 in San Diego), a 30-year high balance conventional at 6.5% and a jumbo 30-year fixed at 6.75%.

Note: The 30-year FHA conforming loan is limited to loans of $644,000 in the Inland Empire and $766,550 in LA, San Diego, and Orange counties.

Eye-catcher loan program of the week: A 10% down, 30-year fixed rate with no PMI to $1.5 million loan amount, 8.125% rate with 1 point cost.

Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or jlazerson@mortgagegrader.com.

There are few good home choices to buy and plenty of buyer competition in a tight inventory market, now four years running.

Do I sell first? Maybe a rent back for 60 days in hopes I can find something and get escrow closed in time? Or perhaps move twice by selling, renting and then finding a home to buy.

Also see:Should California house hunters wait until 2025?

Few home sellers have the appetite to accept offers from contingent buyers. (Contingency means a buyer will complete a home purchase after they sell and close their own home). Amid explosive buyer demand, home sellers have better offers such as all cash offers or buyers who can finance and close within 21 days.

A bridge or swing loan, though expensive, could be one solution for homebuyers looking to unlock their home equity and use it toward buying a home without a contingency attached. And it brings certainty about what you are buying before you release your current home to be sold.

Also see: California’s down payment assistance lottery reopens for first-time homebuyers

“The biggest benefit is you don’t first have to sell your property, said Ken Thayer, president at Residential First Capital. “(This) unlocks equity and gives them peace of mind.”

What’s ahead for housing: Betting on early 2024 Fed rate cuts is ‘foolish’

Here are the basics of a bridge loan.

An appraisal is done on both properties to confirm their values. The bridge lender will have a first-position mortgage against the departing residence and a first-position mortgage lien against the home being acquired. Bridge lending typically lends up to 60% combined value of both properties (industry parlance calls this loan-to-value). I did find one lender loaning as much as 75% of the combined property values.

Here’s an equity extraction example at 60% of combined property values: Let’s say your existing home is worth $1 million. You own the home free and clear. You are paying $1.5 million for your new palace. The combined value of the two homes is $2.5 million. The maximum cash-out bridge loan would be $1.5 million or 60% of the combined property values.

More on real estate: First Team trial accuses Coldwell Banker of ‘thievery’ over agent defections

A single first mortgage lien is placed against both properties, which is called cross-collateralization. You can close escrow on your new home with the $1.5 million cash-out loan.

The catch: Buyers cannot finance any financing charges or settlement charges, according to Thayer. Buyers would have to bring those funds out of pocket. If the settlement charges are $6,000, then you’ll be writing a check for that amount.

Let’s say you net out $1 million on your departing residence.

You originally borrowed $1.5 million. You still owe $500,000 even after the $1 million was paid back from the sale of your departing residence. Pay off the remaining $500,000 by refinancing the remaining bridge loan balance with a conventional 30-year mortgage. Or pay cash if you have it.

Bridge loans cost about 2 points or 2% of the loan amount. For $1.5 million, that’s $30,000 plus settlement charges of perhaps $6,000. Terms are for 11- months, with a balloon payment required at the end of the term (if not paid off). Rates are interest-only at 9.5% to 10.5%, says Thayer. There is no required ability-to-repay income qualifications.

If you are buying from a new home builder, you could ask the builder to pay the bridge financing costs so that you can make a non-contingent purchase.

Bridge financing is an expensive proposition for sure. But it might still be money well spent.

First, you are buying what you want and what you choose to buy. No angst. As home prices continue to ascend, you might net out more from your departing residence due to a delayed sale. You go to sleep tonight, and your home is worth more when you wake up tomorrow morning in many cases. Sellers don’t have to move twice, which is also expensive and very time-intensive.

Freddie Mac rate news

The 30-year fixed rate averaged 6.69%, 9 basis points higher than last week. The 15-year fixed rate averaged 5.96%, 20 basis points higher than last week.

The Mortgage Bankers Association reported a 3.7% mortgage application increase compared with one week ago.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $766,550 loan, last year’s payment was $281 less than this week’s payment of $4,941.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 5.5%, a 15-year conventional at 5.375%, a 30-year conventional at 5.99%, a 15-year conventional high balance at 6.625% ($766,551 to $1,149,825 in LA and OC and $766,551 to $1,006,250 in San Diego), a 30-year high balance conventional at 6.875% and a jumbo 30-year fixed at 6.75%.

Note: The 30-year FHA conforming loan is limited to loans of $644,000 in the Inland Empire and $766,550 in LA, San Diego, and Orange counties.

Eye catcher loan program of the week: A 30-year adjustable with 30% down, fixed for the first five years at 5.75% 1 point cost.

Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or jlazerson@mortgagegrader.com.

Reducing settlement costs is one way. More lenders are accepting or at least contemplating Attorney Opinion Letters instead of title insurance.

The savings can be big.

Last month, I wrote about AOL savings of $2,891 on a $995,000 sales price ($780,000 loan amount) compared with a title insurance policy.

Mortgage giants Fannie Mae and Freddie Mac are looking at ways to lower closing costs and make homeownership more accessible for low- to moderate-income and minority homebuyers.

In mid-December, Fannie Mae expanded its AOL guidelines to include most HOA communities. Previously, AOLs were limited to single-family homes without an HOA. So far, Freddie Mac hasn’t said if it’s also going to expand its AOL guidelines to HOA properties.

AOLs also are allowed on FHA transactions.

The Department of Veterans Affairs does not require a lender making a VA loan or the Veteran-borrower to obtain title insurance or, an Attorney Opinion Letter. Its handbook requires only that a title to a property meet its standards. Neither title insurance nor AOLs are required.

And while they aren’t required by the VA, anyone buying or selling should get some type of title search done. In my experience, lenders always vet the title records. Ultimately, the lender, not VA, could end up having to deal with a title defect.

Others in the industry have not leaped into AOLs — yet.

I polled several of my wholesale mortgage lenders and found the only lender not accepting AOLs was Rocket Mortgage, which was the largest volume lender in the U.S. in 2022.

Two of our bigger banks also do not accept AOLs.

Bank of America told me it’s not accepting the letters. Wells Fargo said it was reviewing the option but has no plans to allow AOLs “in lieu of a lender title insurance policy at this time,” according to Tom Goyda at Wells Fargo Bank.

So, what is title insurance?

Title insurance protects you and your lender if someone challenges the title to your property. This often comes in the form of an alleged title defect, which was unknown at the time of sale, according to the California Department of Insurance website.

Title insurance provides comprehensive coverage for many issues that AOLs don’t, including fraud and forgery, according to the American Land Title Association.

And what is an Attorney Opinion Letter? And is it a safe option?

An AOL is a legal opinion prepared by an attorney that provides their professional determination of the status of title to a property, and when delivered to a lender, the priority of the mortgage lien.

Fannie Mae performed a rigorous analysis to evaluate the risk and protection offered by AOLs and concluded they provide a comparable level of risk protection when coupled with a lender’s representations and warranties, the mortgage giant found.

The Mortgage Bankers Association commissioned an AOL study by the law firm BlankRome, which concluded, in part, that there was room for both types of products to exist in today’s market.

For now, MBA is not taking a position on alternatives to traditional title insurance, according to Adam DeSanctis, vice president, communications, MBA.

Why not? My hunch says that MBA may be stuck in the diplomatic middle between lenders wanting to find cheaper settlement services (who don’t own title companies) and other lenders who own title companies that may be cash cows.

Others tell me that AOLs are not for complex transactions like probate. Ryan Marshall, a consultant to Voxtur Analytics, which sells AOLs and title insurance, says the letters don’t provide heir searches, for example.

But industry change is likely coming, mostly because title defects are not what they once were.

“The secondary mortgage replaced the 1980s savings and loans when title searches weren’t closely monitored,” said Ted Tozer, president of Ginnie Mae during the Obama presidency. “Since then, there have been minuscule problems. AOLs come with plenty of protection for the buyer to make the buyer whole. What does it really cost to do a title search?”

I’ve arranged thousands of mortgages in my 37 years. I’ve been involved in exactly two title insurance claims.

The first one was a builder who transposed unit #2 and unit #4 on a 4-unit San Pedro condo complex. It was an easy fix when the unit numbers were properly recorded.

The second was borrower fraud in early 2000. The borrower applied for a second mortgage with me at the same time he applied elsewhere. He coordinated the loans to fund at about the same time. The lenders didn’t know about each other. The borrower walked away with all the cash from both lenders and let the property go into foreclosure.

Title issues are rare to my knowledge. And yes, they do occur.

When asked, the American Land Title Association did not offer a single example in which a consumer bought an AOL, and it came back to bite them. (Specifically, where a title insurance policy would have been available to cover the claim had the consumer purchased title insurance instead.)

Freddie Mac rate news

The 30-year fixed rate averaged 6.6%, 6 basis points lower than last week. The 15-year fixed rate averaged 5.76%, 11 basis points lower than last week.

The Mortgage Bankers Association reported a 10.4% mortgage application increase compared with one week ago.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $766,550 loan, last year’s payment was $226 less than this week’s payment of $4,896.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 5.5%, a 15-year conventional at 5.375%, a 30-year conventional at 5.99%, a 15-year conventional high balance at 6.5% ($766,551 to $1,149,825 in LA and OC and $766,551 to $1,006,250 in San Diego), a 30-year-high balance conventional at 6.75% and a jumbo 30-year fixed at 6.625%.

Note: The 30-year FHA conforming loan is limited to loans of $644,000 in the Inland Empire and $766,550 in LA, San Diego, and Orange counties.

Eye-catcher loan program of the week: A 30-year adjustable with 30% down, fixed for the first five years at 5.625% 1 point cost.

Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or jlazerson@mortgagegrader.com. His website is www.mortgagegrader.com.

On Jan. 1, Freddie Mac expanded its down payment assistance website and search engine DPA One, which originally launched Oct. 16, to include California. The site now has 80 down payment assistance programs to help California home shoppers.

DPA One aggregates down payment assistance programs in a single, standardized tool so that lenders can access and compare programs, according to its October 16 press release.

Freddie Mac said in its press release on the DPA One expansion that a down payment on a home is the single largest hurdle for first-time buyers.

I beg to differ, at least for certain homebuyers here in Southern California. In my experience over the past few years, finding affordable payments on expensive starter homes is the biggest hurdle, particularly for first-time homebuyers. With prices so high, they’re either continuing to rent or moving to cheaper quarters outside of California.

Down payment and closing cost programs have become more ubiquitous in the last several years. Freddie Mac’s tool allows you or your mortgage loan originator to search and do a side-by-side program comparison for assistance programs loaded onto its site.

For example, I searched for a $600,000 sales price in Santa Ana, for a family of four with $100,000 annual household income and a 700 FICO score. DPA One provided 10 search results for my query. Not bad.

After poking around the programs, I could not find a range of down payments available. But I did find varying examples.

One program offered a 3.5% down payment of the sales price, which is deferred and payable when the home sells or is refinanced. That program, from Golden State Finance Authority, also provided for an additional 2% gift for a down payment and closing cost assistance, which does not have to be repaid.

Another program offered a deferred payment second mortgage for up to $80,000, not to exceed 20% of the sales price, from the Affordable Housing Clearinghouse.

Here’s my advice to anyone who tries DPA One. It’s new, so don’t be surprised if the system is a bit clunky.

For example, there are easy logins and registration ability for DPA providers and housing industry professionals. But nothing inside the website is particularly consumer friendly. Consumers, by the way, can easily register as they don’t need a mortgage lender license or mortgage originator license number, for example, to register.

Here are some of the limitations I found when I used DPA One.

For example, a homebuyer can only compare a maximum of three programs side by side even if there are 10 assistance programs to consider.

Consumers also may not understand some nuances within the site’s questions.

For example: What is the difference between annual household income and annual qualifying income?

Applicants might not know that household income can include overtime pay and annual bonuses, for example. Howver, income qualifying for underwriting purposes may not allow this because there isn’t a long enough history.

And what if someone went from a salaried job to a commission job? Unless there is a two-year commission history or the commission is guaranteed by the company, chances are the income won’t be counted.

There are a lot of important income calculation details in which consumers may erroneously think they qualify when they do not.

This is the first ever (to my knowledge) foray of the mortgage giant into consumer-facing products.

If, in fact, Freddie’s (and Fannie Mae’s) endgame is for consumers to eventually go directly to them, the move would dramatically improve payment affordability and reduce settlement charges.

For example: A 30-year mortgage would likely be one-half percent cheaper if mortgage loan originators were excluded. Artificial intelligence and ingenuity are what it will take for consumers to go directly to the mortgage giants. What’s lost in the mix? Services for those consumers when they have questions.

Last year I wrote about another firm Down Payment Resource or at downpaymentresource.com.

Today, the company has 252 agencies in California offering 370 homebuyer assistance programs, 244 of which are currently active and funded (on the DPR site, Sean Moss, executive vice president of product and operations at Down Payment Resources, told me. 

It’s worth checking and comparing DPR to DPA One, since Freddie Mac’s site currently has 80 California programs and DPR has three times as many.

Consumers searching these down payment sites are best advised to have a mortgage loan originator alongside who understands the program limitations and nuances. And they know the clarifying questions to ask of the DPA providers.

Freddie Mac rate news

The 30-year fixed rate averaged 6.66%, 4 basis points higher than last week. The 15-year fixed rate averaged 5.87%, 2 basis points lower than last week.

The Mortgage Bankers Association reported a 9.9% mortgage application increase compared to two weeks ago.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $766,550 loan, last year’s payment was $166 less than this week’s payment of $4,926.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 5.5%, a 15-year conventional at 5.375%, a 30-year conventional at 5.875%, a 15-year conventional high balance at 6.125% ($766,551 to $1,149,825 in LA and OC and $766,551 to $1,006,250 in San Diego), a 30-year high balance conventional at 6.5% and a jumbo 30-year fixed at 6.5%.

Note: The 30-year FHA conforming loan is limited to loans of $644,000 in the Inland Empire and $766,550 in LA, San Diego, and Orange counties.

Eye-catcher loan program of the week: A 30-year, fixed rate at 6.875% without cost.

Jeff Lazerson is a mortgage broker and president of MortgageGrader.com and Lazerson Learning. He can be reached at 949-334-2424 or jlazerson@mortgagegrader.com. 

As of Jan. 4, the Freddie Mac 30-year fixed sat at 6.62, 1 basis point higher than last week but 117 basis points less than 7.79%, its October high-water mark.

Aggregate household debt in the third quarter stood at $17.29 billion, according to the New York Fed. Mortgages, credit cards, auto loans, student loans and the like are “only” about half of the national debt, which hit a record $34 trillion on Jan. 3.

Also see: Freddie Mac unveils tool to help clear condo financing reviews faster

U.S. mortgage balances stand at $12.14 trillion and home equity lines $386 billion. Credit card balances stand at $1.08 trillion, according to Fed data.

For homeowners in deep debt, does this mortgage downswing mean it’s time to refinance or add a second mortgage or home equity line-of-credit?

Today, very well-qualified borrowers can capture a 30-year, cash-out fixed rate at 5.875% with 2 points cost. Fannie Mae and Freddie Mac charge more for cash-out refinancing in comparison to a no cash-out refinance or a purchase mortgage.

More on lending: Government-backed mortgage loan caps rising to $1,149,825 in OC, LA

Less than 9% of active California mortgage holders have interest rates at or greater than 6%. Nationally, just 11% of mortgage holders have rates at 6% or more, all according to the data firm ICE.

If your credit card debt and the like is manageable, and you can continually knock down the balances each month, then you should consider staying the course. Protect your piggyback (home equity).

Also see: Can you buy a home with nothing down? FHA has zero-down loan

Annualized, approximately 8% of credit card balances and 7.4% of auto loan balances transitioned into delinquency, according to the New York Fed data. Do whatever you can to keep the payments on time. Late charges and delinquencies will crush good FICO credit scores.

If cash flow is a challenge or your savings are getting into the red zone (because your monthly household debt output is greater than your monthly net income), then it’s time to do some equity-tapping math.

More housing news: ‘The era of saying ‘no’ to housing is coming to an end’: New California building laws for 2024

For example, let’s say you took out a $500,000 mortgage during the pandemic, with the rate sitting very nicely at 3.5%. Your home is worth $1 million. And you have a 750 middle FICO score. But you also have run up $25,000 of credit card debt at a 20% interest rate.

The simple math tells us it’s obvious you don’t want to be trading a 3.5% fixed rate for something in the high-5s or 6s to get rid of a comparably small balance, but high rate.

In this case, you should consider putting a HELOC or a fixed rate second mortgage behind your first mortgage. You may be able to find a no-closing-cost HELOC with starting rates lower than prime (prime rate is 8.5% today) or prime plus 1% or 2%. Even if you paid 10% on a HELOC, you are reducing your borrowing cost by 10%.

Assuming interest-only payments, $25,000 of credit card debt at a 20% interest rate costs you $5,000 in annual interest. Chopping the rate down to 10% saves you $2,500 in interest charges.

I should add that most HELOC’s have terms of 25-30 years. For the first 10 years, borrowers have the option of making interest-only payments. In year 11, the principal and interest amortization is required for the remaining term.

That said, be disciplined and continue making the same payments as you were before the HELOC. That way, you’ll accelerate the credit card principal balance reduction with cheaper borrowing costs. And you don’t want to get caught up pushing credit card balances out over say 30-year HELOC term.

If you transfer your credit card debt to a HELOC, the interest is not tax-deductible.

Let’s say you purchased a home in 2023. You are sitting on a $650,000, 7% mortgage note. Your middle FICO score is 750. Your home is worth $1.3 million. The monthly mortgage payment is $4,324. On top of this, you have $100,000 in auto loans and credit card debt, which has a blended borrowing cost of 12%. Let’s say you are paying $1,000 per month on the $100,000 of other debt. Your combined payments are $5,324.

You could get a no-cost, 30-year fixed, cash-out mortgage at 6.875%. Assuming your new loan balance is $750,000, your new principal and interest payment would be $4,927. This reduces your monthly payment by $397. Even though your mortgage payment only went down by 0.125%, your other debt went down by 5.125%. And you paid nothing (but your time) to get the mortgage. Again, pay that $397 monthly payment savings toward the principal reduction.

Shop around for your best deal. If you are not a math wiz, then sanity check the quotes with your tax adviser or a very smart friend.

Debt consolidation is not the only reason borrowers may be calling about cashing out. Some are eyeing the purchase of other properties, be it a residence or a rental. The cash-out can help with the down payment.

And others sitting on low primary home loan rates can pull cash-out of their rentals, either as a first mortgage or a fixed second. Beware: Rates are substantially higher when tapping cash from rentals.

Interest on borrowed funds used to buy property or do home improvements may very well be tax-deductible. Generally, new mortgage debt is deductible up to $750,000 on a primary residence. Always consult with your tax adviser before finalizing any decisions.

Freddie Mac rate news

The 30-year fixed rate averaged 6.62%, 1 basis point higher than last week. The 15-year fixed rate averaged 5.89%, 4 basis points lower than last week.

The Mortgage Bankers Association reported a 9.4% mortgage application decrease compared to two weeks ago.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $766,550 loan, last year’s payment was $71 less than this week’s payment of $4,06.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 5.5%, a 15-year conventional at 5.375%, a 30-year conventional at 5.99%, a 15-year conventional high balance at 6.125% ($766,551 to $1,149,825 in LA and OC and $766,551 to $1,006,250 in San Diego), a 30-year high balance conventional at 6.5% and a jumbo 30-year fixed at 6.5%.

Note: The 30-year FHA conforming loan is limited to loans of $644,000 in the Inland Empire and $766,550 in LA, San Diego, and Orange counties.

Eye-catcher loan program of the week: A 30-year, jumbo fixed rate at 6.25% with two points.

Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or jlazerson@mortgagegrader.com.

Here’s a look at my predictions for 2024.

First, significant savings are coming to the title insurance world thanks to something called the Attorney Opinion Letter. It’s a title insurance alternative for home sellers, homebuyers and those refinancing a home loan who have long complained to me and others in the industry about the title insurance racket.

Also see: Navy Federal Credit Union rejected more than half its Black mortgage applicants

On Dec. 13, Fannie Mae expanded its AOL guidelines to include condos, townhouses and single-family residences with community associations, particularly new construction. Most properties subject to an HOA or restrictive covenant are now eligible to use an AOL. Previously, the attorney letter applied only to single-family residences.

Title insurance protects you and your lender if someone challenges the title to your property. This often comes in the form of an alleged title defect, which was unknown to you at the time of sale. It typically rears its ugly head at some future date during your ownership, according to the California Department of Insurance website.

Related: 35% of Americans want a housing crash, poll says

The Attorney Opinion Letter offers similar protections, only it’s vastly less expensive.

For example, pricing from Voxtur offers AOL title insurance pricing of $995 for both a California home seller and homebuyer, assuming a $975,000 sales price and a $780,000 loan amount. To compare: Lawyers Title Insurance charges a title insurance rate of $2,596 to the home seller and $1,290 for the homebuyer. That’s a 75% savings or $2,891 in real dollars.

Title insurance in the United States is a $27.3 billion industry, according to IBIS World.

Don’t be surprised to see title companies stampeding a path to California Insurance Commissioner Ricardo Lara, requesting permission to lower their rates to compete with AOL pricing.

According to Fannie Mae, 5.2% of all homebuyers, 9.5% of first-time buyers and 14.5% of low-income first-time buyers have closing costs that are greater than or equal to their down payment.

Rates next year

The Freddie Mac 30-year fixed will whipsaw next year, bouncing up and down, averaging 6.5% for 2024. Expect Freddie Mac’s rate to end 2024 similarly as it is this year — free-falling. Next year will end with Freddie Mac rates averaging 5.25%.

Freddie Mac started 2023 with an average rate of 6.48% on Jan. 5. It peaked at an eye-popping 7.79% on Oct. 26. Then came a welcome tumble. This week, the average rate dropped to 6.95%. That’s an 84-basis point (nearly a full point lower for a mortgage) decline in six weeks.

Loan volume will soar

Mortgage volume will increase 25% in 2024 to $2.05 trillion, according to my crystal ball. The Mortgage Bankers Association expects total mortgage volume to increase to $1.95 trillion in 2024 compared with an expected $1.64 trillion in 2023.

Even though we see promising signs of lower inflation, that beast has not been conquered just yet. The Consumer Price Index is up 3.1% compared with a year ago in November. Core inflation is up modestly.

The U.S. Federal debt continues to balloon. Funding Social Security and Medicare will require more spending. Many other dollars are being spent to address global geopolitical issues. Whipsaw it will be.

Lawsuits and commissions

Commissions will tumble. This is largely the result of antitrust lawsuits aimed at what I’ll call the commission cartel.

Also see: Will real estate commissions ever change?

In late 2023, a federal jury said the National Association of Realtors and several other big brokerages were conspiring to inflate commission rates. The $1.78 billion verdict promises to upend how sales agents are paid.

Also see: Real estate brokers pocketing up to 6% in fees draw antitrust scrutiny

One industry executive told me more than 50% of buyer-side commissions in Orange County are now 2% or less. Some listing agents are offering as little as $200, $500, $1,000 and $2,500 to the buyer’s agent.

More importantly, this high commission litigation dagger is going to make it much easier for one or more efficient new companies to enter the 2024 market with much lower home selling/bartering costs. Think of a Costco- or Amazon-type model.

Home prices not coming down

Southern California home appreciation rates in Los Angeles, Orange, Riverside, San Bernardino and San Diego counties will double in 2024 to 11%, compared with the 5.5% year-over-year rate in 2023.

As interest rates decline, affordability will improve. Home shoppers who struggled with rising mortgage rates along with rising prices over the past 18 months learned their lesson to jump on the bus sooner. This time around they will jump faster, and yes, deal with even higher home prices.

Also see: Crash or climb? Jobs may decide fate of California home prices

Here’s an example:

Take a home sales price of $843,750, assuming 20% down for a $675,000 loan amount. At today’s 30-year rate of 6.95%, the principal and interest payment is $4,468. Assuming homes appreciate 11%, we’re looking at a sales price of $936,562. Assuming 20% down, the loan amount is $749,250. Assuming a 6% mortgage, the principal and interest payment is $4,492 or just $24 more on mortgage balance that’s $74,250 bigger. But don’t forget property taxes, which will be higher for the more expensive home.

Inventory will grow, too

Southern California inventory of homes for sale in the five-county area averaged 4,508 in 2023, according to data from Reports on Housing. I see 2024 inventory increasing to an average of 7,000 homes as more folks are going to be forced to sell. Job losses and diminished savings are front and center. I’m hearing more and more stories from real estate professionals about homeowners who can no longer afford to live in Southern California.

Expected market time (listing time until going into escrow) of Southern California homes for sale averaged 82 days in the five-county area for 2023, also according to data from Reports on Housing. I see the expected time dropping to 50 days for the 2024 as lower mortgage rates will surely reduce market time.

The end of big investor buyers

End Hedge Fund Control of American Homes Act of 2023, legislation recently introduced in Congress to ban hedge funds from buying and owning single-family home in the United States, will pass in 2024.

Also see: Cash buyers flood US housing market, no-mortgage buys at 10-year high

More Homes on the Market Act, a bill to double the capital gains’ exemptions from $250,000 to $500,000 for single filers and $500,000 to $1 million for married couples will not pass in 2024. The federal government desperately needs more revenue. This one will have to wait until 2025.

Freddie Mac rate news

The 30-year fixed rate averaged 6.95%, 8 basis points lower than last week. The 15-year fixed rate averaged 6.38%, 9 basis points higher than last week.

The Mortgage Bankers Association reported a 7.4% mortgage application increase compared to last week.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $766,550 loan, last year’s payment was $324 less than this week’s payment of $5,074.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 5.625%, a 15-year conventional at 5.5%, a 30-year conventional at 6.125%, a 15-year conventional high balance at 6.125% ($766,551 to $1,149,825 in LA and OC and $766,551 to $1,006,250 in San Diego), a 30-year high balance conventional at 6.5% and a jumbo 30-year fixed at 6.625%.

Note: The 30-year FHA conforming loan is limited to loans of $644,000 in the Inland Empire and $766,550 in LA, San Diego, and Orange counties.

Eye-catcher loan program of the week: A 30-year, conforming fixed rate refinance at 6.875% without points.

Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or jlazerson@mortgagegrader.com.

On Friday Dec. 8, Federal Home Loan Mortgage Corp. rolled out a tool called Project Assessment Requests, which promises to quickly (and for free) indicate if a condo community qualifies for Freddie Mac financing.

This tool, with the click of a few keys, spits out whether a condo community is either “project certified” or “not eligible.” (“Project,” by the way, is the name the government uses for condo communities.) If a project is certified, this means a lender likely needs only minimal underwriting, which saves them time and the borrower money.

Freddie Mac reps said the process to check a property takes “just seconds.” Any feedback on ineligible communities will provide lenders a framework on where to focus their review early in the origination process. The mortgage giant said a project status can change “if additional information is provided or if the identified issues are remediated, and the project then meets applicable requirements.”

A mortgage originator also can track what needs to be completed and even appeal, also at no cost.

You may recall that the landscape of condo sales changed radically after the Champlain tower collapse in 2021 in South Florida. The community’s HOA board had for years deferred maintenance on the two-tower property. Water damage in an underground parking structure eventually weakened the structure, sending it plummeting down around 1:30 a.m. on June 24 while many residents slept. The devastating collapse killed 98 people.

Today, mortgage lenders, especially government-sponsored enterprises like Fannie Mae and Freddie Mac, want to be sure homeowners associations are financially stable, properly managed and all common areas are sound before lending buyers money. In January 2022, the agencies launched a questionnaire to determine a community’s qualifications.

This new standards stalled myriad condo deals in California and nationwide, as buyers learned deep in the process that their prospective homes were not eligible for loans from the mortgage giants.

Freddie’s new condo tool vows to help increase application transparency, but borrowers still will need to rely on a loan officer to determine the status of a condo project.

Industry insiders, so far, are optimistic.

“Community Associations Institute is very encouraged by this,” said Dawn Bauman, senior vice president of government and public affairs at the trade association. “We hope this will decrease hurdles for sales in condominiums throughout the U.S.”

If the condo project isn’t Freddie Mac (or Fannie Mae) approved, buyers’ choices are limited. They can either try and address the deficiencies in order to get approval or the loan originator can attempt to find financing using a non-warrantable condo mortgage.

Non-warrantable mortgages are very expensive compared with Freddie Mac (or Fannie Mae) rates, if your loan originator can even find one. Freddie Mac offers mortgages with as little as 3% down with rates hovering in the 7% range.

Non-warrantable mortgages are (minimally) “20% down and 175 basis points higher in rate (8.75%) than conventional rates,” said Joe Lydon, co-founder and managing director of Lendsure.

Full disclosure: My firm, Mortgage Grader, is a Lendsure client.

If your property is not eligible under Fannie Mae or Freddie Mac rules, the status can still change or appealed. Beginning Feb. 26, 2024, even the HOA (not just the lender) can inquire directly if their project has a “not eligible” status and take action to address any issues that need to be remedied.

Here’s how things have worked until now …

The buyer and their agent find a condo and make the offer. Assuming a deal is struck, the buyer provides 3% (of the purchase price) as a good faith deposit to the escrow company. The buyer pays for a home inspection of $600 and a $650 appraisal. Oftentimes, the buyer fronts $300 for the condo documents for the lender to review.

Buyers and most real estate professionals assume excellent financing terms are available, without realizing how important it is to have a lender check a condo’s approval status. If it’s a non-warrantable condo, then the buyer is faced with a shockingly more expensive mortgage or canceling the transaction altogether. That’s a lot of wasted money and time.

To my knowledge, lenders typically check a condo’s eligibility with Fannie Mae, not wanting to go through the old, onerous Freddie condo-checking process.

It’s not clear to me if Fannie Mae’s eligible condo project standards are the same as Freddie Mac’s. My suggestion for any consumer is to have the lender check with Freddie Mac first. If the property is not “project certified,” then find out what you are up against in terms of approval deficiencies.

Other tips:

—If there is a lot to be done, then either get prepared for non-warrantable condo pricing or move on.

—If the hurdle feels surmountable, have your lender check Fannie Mae’s list for eligibility or see how quickly the lender can get the required goods for Freddie Mac’s condo team to review and approve it.

For now, we wait and see if Freddie’s tool works. And I can’t help but wonder if Fannie Mae follow suit. So far, the agency did not respond to my query.

Freddie Mac rate news

The 30-year fixed rate averaged 7.03%, 19 basis points lower than last week. The 15-year fixed rate averaged 6.29%, 27 basis points lower than last week.

The Mortgage Bankers Association reported a 2.8% mortgage application increase compared to last week.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $766,550 loan, last year’s payment was $356 less than this week’s payment of $5,116.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 6%, a 15-year conventional at 6%, a 30-year conventional at 6.375%, a 15-year conventional high balance at 6.625% ($766,551 to $1,149,825 in LA and OC and $766,551 to $1,006,250 in San Diego), a 30-year high balance conventional at 6.875% and a jumbo 30-year fixed at 6.875%.

Note: The 30-year FHA conforming loan is limited to loans of $644,000 in the Inland Empire and $766,550 in LA, San Diego, and Orange counties.

Eye-catcher loan program of the week: A 30-year jumbo, adjustable, fixed for the first five years, rate at 7% with 1 point cost.

Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or jlazerson@mortgagegrader.com.

In high cost coastal counties, Los Angeles and Orange counties’ high balance loan limits increased to $1,149,825 from $1,089,300. San Diego County’s cap rose to $1,006,250 from $977,500 and Ventura County increased to $954,500.

In the Inland Empire and thousands of other more moderately-priced communities nationwide, the mortgage agencies’ conforming loan limit rose 5.5% to $766,550 for 2024 from the current $726,200.

A month of falling mortgage rates and these new loan limits could help bolster the region’s sales pace, which is running at its slowest in 36 years. Limited inventory and high prices have kept many would-be buyers sidelined. The median home price in Orange County was $1.05 million in October. In LA County, the median was $837,000.

This week Freddie’s 30-year rate landed at 7.22%, more than one-half point lower than the 7.79% rate just a short ago.

Any loan amount above the high balance threshold is considered a jumbo mortgage. Higher mortgage rates and fees along with tougher credit and underwriting standards are typical of jumbos. That said, as mortgage rates spiked over the last 18 months, some jumbo lenders have beaten Fannie HB rates. So, my advice is: Do your homework and check around. Don’t just assume a Fannie Mae high-balance loan will beat a jumbo mortgage.

Federal Housing Administration conforming and high balance mortgage limits tend to match the Fannie Mae-specific county limits. One big Southern California exception is the Inland Empire. Riverside County and San Bernardino County’s maximum FHA loan amount is $644,000, unchanged from 2023’s limit and significantly lower than Fannie Mae and Freddie Mac’s new loan limit.

Why do these loan caps change? The Housing and Economic Recovery Act requires the Federal Housing Finance Agency adjust its loan limits according to home price changes.

FHA is required to update its annual loan limits each year using a formula prescribed in the National Housing Act.

Shaun Shenk, a public liaison with the Department of Veterans Affairs, told me that VA loan limits are the same as the Federal Housing Finance Agency limits.

A home equity conversion mortgage, also known as a reverse mortgage, also will get a bump in 2024, rising to a maximum loan amount of $1,149,825. Borrowers can seek this amount or the appraised value, whichever is lower.

For investors who own or want to buy two- to four-unit buildings, the new conventional maximum conforming loan limits for two units is $981,500, three units is $1,186,350 and four units is $1,474,400.

In other positive Fannie Mae lending news, the institution now allows a borrower to put just 5% down or 5% equity on any owner-occupied conforming loan to buy or refinance property with two to four units. Before Nov. 18, Fannie Mae required between 15% and 25% down for two to four units. In my opinion, the higher loan caps now make buying units such as these a lot more achievable if a buyer only has to scrape up a 5% down payment.

The new high balance conventional loan limits for rental units in LA and OC are two-units $1,472,250, three-units-$1,779,525 and four-units $2,211,600.

Most lenders will use the new conventional loan limits immediately. If you are on the loan limit bubble, check with your lender. Don’t assume the increased limits will apply before Jan. 1.

Without exception, FHA and VA updated loan limits start with new case numbers issued beginning on Jan. 1.

Freddie Mac rate news

The 30-year fixed rate averaged 7.22%, 7 basis points lower than last week. The 15-year fixed rate averaged 6.56%, 11  basis points lower than last week.

The Mortgage Bankers Association reported a .3% mortgage application increase compared to last week.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $766,550 loan, last year’s payment was $374 less than this week’s payment of $5,214.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 6.125%, a 15-year conventional at 6.125%, a 30-year conventional at 6.625%, a 15-year conventional high balance at 6.875% ($766,551 to $1,149,825 in LA and OC and $766,551 to $1,006,250 in San Diego), a 30-year-high balance conventional at 6.99% and a jumbo 30-year fixed at 7%.

Note: The 30-year FHA conforming loan is limited to loans of $644,000 in the Inland Empire and $766,550 in LA, San Diego, and Orange counties.

Eye catcher loan program of the week: A 30-year jumbo, adjustable, fixed for the first five years, rate at 6.875% with 1 point cost.

Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or jlazerson@mortgagegrader.com.

Home prices are high. Mortgage rates are high. But many more homebuyers are on the sidelines. I’ve found a financing tool that might help. It’s an FHA zero-down loan program. But it comes with some asterisks.

Most first-time homebuyer programs are wrought with untenable restrictions for too many, putting many well-intentioned programs out of reach. For example, they often come with income caps or the buyer is restricted to certain areas also known as census tracts. A pretty common restriction says a buyer cannot have owned a property in the past three years.

I found a Federal Housing Administration program that offers a zero-down loan, which is particularly beneficial for renters who want to get on the road to homeownership.

The program does not have income caps or census tract limitations. The lowest middle FICO score on this particular program for all borrowers is 600. Non-occupant co-borrowers also are allowed to boost the buyer’s qualifying income. Applicants also don’t have to be a first-time buyer and they can even depart the residence, sell it or rent it and move up.

The only restriction is the loan cannot exceed the FHA conforming limits which are $726,200 in Los Angeles County, Orange County and San Diego County. For the Inland Empire, the limit is $644,000. And by the way, those maximum loan limits likely rise on Jan. 1.

The FHA does, however, require a down payment of 3.5%. To help the borrower with that sizeable cash payment, the program uses a second mortgage with a 10-year term to fund the down payment. The down payment second loan provides a note rate 2% higher than the first lien mortgage rate.

So, let’s run the numbers:

Take a $650,000 sales price with 3.5% down ($22,750). The base loan amount is $627,250. We add the upfront FHA mortgage insurance premium of 1.75% to the base loan for a total loan of $638,227. Assuming a 30-year FHA fixed rate also charges 0.55% for monthly mortgage insurance or MMI.

Assuming an FHA 30-year fixed rate at 7.625% without any loan origination points, the principal and interest payment is roughly $4,518.

Then add $287 which is the MMI of 0.55% (calculated on the $627,250 base loan amount).

Next, add $298 for the 9.625% second mortgage (the 10-year down payment loan).

Then add monthly property taxes of $677 based on a property tax rate of 1.25%.

Finally, add roughly $160 for monthly fire insurance, based on 0.3% of the loan amount.

The total payment is $5,940.

Closing costs and upfront required escrow impounds for property taxes, homeowners’ insurance and mortgage insurance will be roughly $9,000. (Remember: Closing costs are separate from the down payment.)

Others (home sellers and real estate agents willing to shave money off their commission, for example) are allowed to contribute up to 6% of the sales price or $39,000 (assuming a $650,000 sales price) for the buyers’ closing costs, escrow impounds, mortgage rate buydowns and the like. Closing cost buyer credits must be negotiated between the buyer and seller (typically the buyer’s agent and the seller’s agent).

Conceivably, you can buy a home with little or no money out-of-pocket.

Yes, that’s a big payment. So, how do we get it a bit lower? Beyond adding a roommate or two, mortgage rate buydowns also could help ease the mortgage payment sticker shock.

For example, a 2-1 buydown (assuming the example above) means a first-year payment based on a 5.625% rate, a second-year payment based on a 6.625% rate and years 3 through 30 at the 7.625% note rate. The total year-one payment would shrink to $5,096. The year-two payment grows to $5,509. And years 3-30 is back to $5,940.

The year one buydown savings/cost is $10,128 ($844 x 12 months). The year-two buydown savings/cost is $5,172 ($431 x 12 months). The total buydown savings/cost is $15,300.

Assuming $10,000 in settlement and impound charges and $15,300 for temporary buydown costs brings a total of $25,300. This is 3.9% of the sales price. It’s well within the 6% allowable credits.

Let’s say mortgage rates come down before the impounded buydown funds are all used. Obviously, you’ll want to refinance your high FHA mortgage note. Impounded buydown funds are the borrower’s money to be used as a credit against what is owed on the first mortgage when refinancing.

For example, assume a $625,000 mortgage balance with $5,000 left of buydown funds. The net effect is you will owe the payoff lender $620,000 on the first mortgage and whatever the amortized balance is left on the second.

The opportunity to consider buying now (or buying up) is that more homes and condos are coming on the market now.

As I wrote earlier, property prices and mortgage rates are very high. So, buyers aren’t stampeding to buy like they have over the previous four years.

On top of that, the holiday season is the slowest sales cycle of the year. Waiting until rates come down further, say to 6% from its current 7% rate range, will undoubtedly mean another stampede of buyers with with to compete — along with the likelihood that home and condo prices will spike again.

No matter what, make sure you can afford the monthly payment — even if you can finagle a zero-down and zero-cost type of purchase. Make sure your income will grow into the payment and do consider some form of a rate buydown. Don’t assume rates will drop and you can refinance into a more affordable payment. There is no guarantee.

Plenty of people lost their homes during the Great Recession from variations of nothing-down loans. While FHA mortgages don’t have any predatory payment increase triggers, we’re still talking zero down.

Zero down is a great opportunity for every would-be homeowner who can afford it.

Freddie Mac rate news

The 30-year fixed rate averaged 7.29%, 15 basis points lower than last week. The 15-year fixed rate averaged 6.67%, 9 basis points lower than last week.

The Mortgage Bankers Association reported a 3% mortgage application increase compared with last week.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $726,200 loan, last year’s payment was $345 less than this week’s payment of $4,974.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 6.25%, a 15-year conventional at 6.375%, a 30-year conventional at 6.75%, a 15-year conventional high balance at 7% ($726,201 to $1,089,300), a 30-year high balance conventional at 7.125% and a jumbo 30-year fixed at 7.125%.

Note: The 30-year FHA conforming loan is limited to loans of $644,000 in the Inland Empire and $726,200 in San Diego, LA, and Orange counties.Eye catcher loan program of the week: A 15-year conforming fixed rate mortgage at 5.875% with two points cost.

Jeff Lazerson is a mortgage broker and president of Mortgage Grader and Lazerson Learning. He can be reached at 949-334-2424 or jlazerson@mortgagegrader.com. 

By Tuesday evening, 12 hours after the U.S. Bureau of Labor Statistics announced the October Consumer Price Index was unchanged from September, that same 30-year mortgage could be had at 7% with just one-third of a point.

Also see: Southern California homes for sale take biggest jump in 15 months

The payment on a 7.5%, 30-year fixed rate, $726,200 loan on Monday was $5,078. That payment at a 7% shrank to $4,832. Yes, a $246 monthly payment decrease is good news, for sure.

For all column readers who have been begging for better rate news, take that 4.8% mortgage payment reduction as an early inflation-fighting stocking stuffer.

Also see: Federal judge dismisses Huntington Beach’s lawsuit against state over housing mandates

This week’s Freddie Mac rate survey failed to reflect the bigger consumer mortgage rate rundown.

Freddie showed a meager 6 basis point reduction (7.5% last week to 7.44% this week). Its survey runs from Thursday of each previous week to Wednesday of the current week. It could be that many lenders responded to Fred’s survey before the CPI report and the resulting mortgage rate plummeted.

My client and first-time buyer Danny Jimenez was one of many making offers on a Riverside home. His agent originally offered $550,000 on Monday morning. Other buyers and Jimenez were facing multiple counter-offers. On Tuesday, after he learned mortgage rates dropped, Jimenez upped his offer to $560,000.

More on home sales: Is the 6% real estate commissions dead?

“Lower rates helped with my flexibility for increasing purchasing power,” Jimenez said. “This definitely makes me feel more optimistic. I want to get into the market now before rates drop further and there’s more (buyer competition).”

Despite the revised offer, Jimenez lost the bidding war.

Have rates peaked? Are happy days here again? Or was this week’s rate rundown just an aberration?

Also see: Just 15% of Californians can afford a home, lowest rate in 16 years

“We’ve seen a peak in mortgage rates,” said Mark Zandi, chief economist at Moody’s Analytics. “Fixed rates are hovering around 7%. Housing doesn’t come back to life until rates come back to 6%.”

Zandi said the 20-basis point drop in one day (referring to the 10-year Treasury rate which mortgage rates tend to shadow) was “as good as it gets.”

He thinks home prices will start sliding (but not slumping) over the next 12-24 months. He expects median prices nationwide to slip 3%-5% over that same period.

The economy is a mixed bag according, to Bill Banfield, executive vice president of capital markets at Rocket Mortgage.

“We haven’t seen the effects of the UAW other labor (wage) results. Retail sales show weakness. The government is issuing more debt to deal with the government debt (inflationary). New student loan payments are $100 to $200 per month. Personal loans, credit cards and auto payment delinquencies are increasing,” Banfield said.

Full disclosure: My firm does business with Rocket Mortgage.

On another topic, how is the Israel-Hamas war affecting the U.S. mortgage market?

“The war remains contained. The impact won’t be consequential (related to housing) is the most plausible scenario,” said Zandi. “If Hezbollah and the Iranians (enter the war), Iranian oil shipping will be disrupted. Oil could hit $100 per barrel. The Fed fears it would have to raise rates with a wage, price spiral.”

While we’ve experienced a noticeable mortgage market improvement this week, I’m not so sure the momentum is sustainable in the near term. I see mortgage rates eventually climbing again. One more Fed rate hike is in the cards in Q1 2024. And, then we’re going to have a nasty economic downturn. And yes rates will come down significantly, say to 6%.

I’m going with Danny Jimenez’s thinking. Buy now before rates drop, if you can. When rates hit 6%, a new stampede of buyers will make it more difficult for a low downpayment and first-time buyers to compete.

Freddie Mac rate news

The 30-year fixed rate averaged 7.44%, 6 basis points lower than last week. The 15-year fixed rate averaged 6.76%, 5 basis points lower than last week.

The Mortgage Bankers Association reported a 2.8% mortgage application increase compared with the previous week.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $726,200 loan, last year’s payment was $405 less than this week’s payment of $5,048.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 6.375%, a 15-year conventional at 6.375%, a 30-year conventional at 6.875%, a 15-year conventional high balance at 7% ($726,201 to $1,089,300), a 30-year high balance conventional at 7.375% and a jumbo 30-year fixed at 7.25%.

Note: The 30-year FHA conforming loan is limited to loans of $644,000 in the Inland Empire and $726,200 in LA and Orange counties.

Eye catcher loan program of the week: A 30-year adjustable, interest-only and fixed for the first five years, rate at 7.375% with 1 point cost.

Jeff Lazerson is a mortgage broker and president of Mortgage Grader and Lazerson Learning. He can be reached at 949-334-2424 or jlazerson@mortgagegrader.com.