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BREXIT and the FED: Why rates are low

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The most significant financial news in recent months has been the decision of Great Britain to exit the European Union. This caused an immediate, if temporary, plunge in the US stock market, and a “Flight to Safety” response amongst investors. Translation: The traditionally safer investments were purchased instead of riskier, higher yielding ones.  Gold, silver, US Treasuries, and Mortgage Backed Securities (MBS) were amongst the winners, which also means that homeowners and home buyers can benefit from low rates generated by the demand for these securities.  The Fed, not wishing to stir the pot any further, decided to leave rates alone for the time being, which brought rates back down after a slight run up leading up to the Fed announcement on Wednesday July 27th. Investors don’t like uncertainty, and will bulk up on safer, often lower yielding investments when the perception of turmoil appears. Since many influential investors are handling millions, if not billions, of dollars in assets, the seemingly manic-depressive nature of the players often causes what some see as over-reaction.  So… you may want to stay alert if you have significant assets or are thinking of refinancing.

 

Things can change in a hurry!


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Is Fannie Mae making Mortgages easier?

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I read a report today that suggests that Fannie Mae, the nation’s largest investor in mortgage loans, may be relaxing some of the guidelines for residential mortgage approval in terms of credit and credit scores. Of course, the guidelines have not been released yet, so it’s anyone’s guess what this will actually mean for consumers.

The report also suggests that guidelines will more clearly define what they will accept. This owudl definitley be a good thing, as I find that lenders will approve loans based upon their own interpretation of the guidelines. AIf they are not clear about what the guidelines actually mean they will err on the side of caution, which transaltes into “ when in doubt, decline the loan.” Because of the QM rule a lot of lenders won’t make mortgages in which the DTI (debt to income ratio) exceeds 43%, but some lenders will make the loans with the higher ratios-as long as they get the proper response from FNMA or Freddie Mac’s automated underwriting engine.

So stayed tuned for information on what the new guidelines are and how they will affect your ability to qualify for a mortgage.

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Leo Linn

800-200-9329


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