One of the questions to consider when you’re buying a home is whether you want a fixed-rate or adjustable-rate mortgage (ARM).

With a fixed-rate mortgage, your payment remains the same for the duration of the loan.

An ARM is fixed for an initial period of time — three, five or seven years.  Then it fluctuates based on market interest rates. The "caps" on your loan will indicate how much the mortgage rate can change after the initial fixed period.

The risk with an ARM is that the rate can go up after that fixed period. The advantage is that the rate during the fixed period is usually lower than it would be for a conventional loan.

So your best financing option depends largely on how long you intend to occupy your home.

If you intend to stay in the same place for the life of the loan, you may be better off with a fixed-rate mortgage because you’ll be protected against rate increases. But if you think you’ll move after a few years, that’s like paying for an insurance policy that you’ll never need.

Similarly, you’ll want to consider how long you intend to be in that home before deciding on a three-, five- or seven-year ARM.

And if an ARM will produce additional cash flow for you, you’ll need to decide what to do with that money — spend it or invest it, perhaps in another house.

A qualified mortgage professional should be able to help you sort through the options available, and decide with one is best for you.

Daily Quote: A real decision is measured by the fact that you've taken a new action. If there's no action, you haven't truly decided.  Tony Robbins

FHA Makes A Move Pre-Inauguration!  Will “The Donald” Follow With A Tweet?

Christmas in January?  What I’d recently put odds of occurring at 50/50 last week came to fruition this morning…perhaps they read this Commentary?!

In a nutshell the FHA decided to reduce MIP on all new FHA loans by 25 basis points.  This reduction, from 85 to 60, brings the MIP premium to within shooting distance of its pre-crisis levels.  Great news for sure but there are some caveats you need to consider before you do the Triple “Landy”: (Thank you Brian Landy!)

  1. The FHA last reduced MIP’s by 50 b.p. in January 2015 which resulted in a huge spike in originations.  However, in 2015 rates also rallied at the same time from Saudi Arabia playing games with the oil market..  Today’s significantly higher rates, coupled with the lower magnitude of the cut, will mitigate the impact of this.
  2. This is only an FHA change.  There is no impact to VA, RHS (Rural Housing), or PIH (Section 184 Public Indian Housing).
  3. “Pre-HARP” FHA loans (generally loans closed prior to June 2009) are still eligible for MI grandfathering; these loans can refi one time and retain their current MIP payment.
  4. Note that Trump and Carson, once inaugurated, could immediately raise MIPs back to their previous levels.    There is recent precedent in the housing sector to enact and reverse a change in this fashion.  When Ed DeMarco was leaving the FHFA, to be replaced by Mel Watt, he approved a broad number of GSE g-fee reforms.  Mel Watt reversed those changes immediately and they never took effect.  But it is hard to know how likely a reversal is in this case.  I’ll note that Watt was reversing a borrower-unfriendly move, while Trump would be reversing a borrower-friendly move, so a reversal is politically more difficult.

So What Does This Mean For Mortgage Participants?

This move is clearly aimed at certain demographics of the home purchase market (Millennials, Lower Income/Higher DTI Borrowers, Renters) who will now have a slightly easily time qualifying for an FHA loan.   

  1. So the tailwinds for the purchase market just got modestly better.  This will offset some of the recent sell off in rates as well. 
  2. There might be some segments of the population which will make a refi more likely but given the sell-off in rates we’ve had plus the relatively modest reduction in MIP (25 basis points) I wouldn’t be looking at this as the start of a new refi boom by any stretch.

Interestingly enough, although I am not a conspiracy theorists at heart, this will also allow FHA to potentially steal some much needed market share from other agencies as production slows.  In order to keep the MI Fund at strong levels (well above the Congressionally mandated 2%) you need new originations…and a move like this will keep seasoned loans from skewing portfolio statistics after a rate rise.  Well played FHA…well played.   


Economic News/Activity: There are no economic releases today

Daily Quote: A new year is like a blank book.  The pen is in your hands.  It is your chance to write a beautiful story for yourself. Happy New Year!!!
What Exactly Is A “New Year”?

What really makes a year “new”?  Is it something as arbitrary as the changing of a calendar or the fact that we’ve once again completed a full orbit around the sun?  Or is a new year defined by some change which makes the future differ from the recent past regardless of the date it occurs?
If you ask me the new year really began on November 9th 2016.  That’s the day everyone woke up to discover (despite what mainstream media was quite certain of) that Hillary Clinton was not going to be the 45th President of the United States and that the demise of the Republican party was greatly exaggerated. 
Not Sure If 2017 Can Truly Be Labeled a “New Year”?

I get the strong impression some are struggling to identify whether this really is a whole new operating environment we find ourselves in or whether we’ll soon be back to the pre-election rate environment of low rates and significant refinance volumes.  While I couldn’t be more opposed to the view that we’ll see pre-election rates again I do understand why there is doubt.  After all, for the last 5 or 6 consecutive years we’ve ended each year with higher rates than we started with only to see a Q1 rate rally as the economy slowed.  In addition, recognition of a significant change in your operating environment then requires significant action…and people hate taking action almost as much as they hate change.   
Then Explain to Me What’s Different This Time?

The main difference between pre-November 9th and post November 9th  is that, for the first time in 7 years, we have an Executive and Legislative branch geared up to pass meaningful pro-growth initiatives. Infrastructure building, Healthcare reform, tax cuts on both the personal and corporate side, defense spending, a push towards less regulation, and tax repatriation strategies for domestic entities to bring $3 - $4 trillion of profits back into the US.  And don’t forget about an increase in Treasury issuance to help pay for some of this.  All of these are unquestionably growth oriented and inflation producing activities assuming they get passed.
But even though none of this has been passed yet and “The Donald” isn’t even in office until January 20th, it’s critically important for you to understand that the markets are forward-looking instruments when it comes to expected inflation and growth.  To understand this more, here is some basic Econ 101 math:
10-Year Treasury Interest Rates = Expected GDP Growth + Expected Inflation + A Time Premium (to compensate you for not having your money for 10-years.)  So if we were in a world of 1.0%  - 1.5% GDP growth and 0.0% - 1.0% inflation then you’d expect a 10-year Treasury yield of about 1.5% - 2.0%.  Now if the expectations for both of them move higher, say, due to a high probability of impending pro-growth legislation, the market immediately prices their expected change in growth and inflation expectations into Treasury yields and they go higher.  And that is why we’ve seen such a significant increase in rates so quickly.  Make sense?
Got It…But Will All Of This Really Get Passed?
Time will tell what ultimately gets passed but here are a few telltale signs much will get done quickly:

  • Inclusion:  President Elect Trump has chosen cabinet members from both Democrats and Republicans which make him appear more inclusive.  Inclusiveness leads to cooperation.  One of President Obama’s great failures which he paid for during the balance of his Presidency was locking Republicans out of the Healthcare reform debate and pushing it through Congress while Democrats controlled both Houses.  Trump is taking a different path.


  • Majority:  Trump also has the convenience of having, like Obama did in 2008, a majority in both Houses.  So pushing through a Republican agenda won’t be difficult if done properly.  Realizing this, Democrats at this stage are simply trying to get a seat at the table versus talking big about blocking or stopping these items. In a nutshell, they know they can’t stop it all so they are trying to play nice (somewhat).


  • Voters:  There are a couple of dozen Democratic seats up for grabs this election cycle and only a small number of Republican seats at risk.  None of these Democrats want to have to tell their constituency that they are not for tax cuts, less regulation, health care reform, etc. Can you imagine what those TV commercials would look like??  As such they’ll be forced to vote on this before the election cycle…so to save their own hide they’ll likely not resist too much.


  • 100 Days:  Every President, for right or for wrong, looks at their 1st 100 days in office as a litmus test for their ability to carry a mandate.  So the push is already on.  In addition, Trump has made a number of very vocal promises during the election cycle so he needs to get some things done quickly.  Therefore expect a whirlwind of legislation to be presented and debated very quickly…and then get passed.

So What Does This Mean For Mortgage Participants?
I know I’ve thrown a lot at you but I thought you’d appreciate some of the detail in order to gain a better understanding of the many moving pieces here.  So here is a summary of what mortgage participants can/should expect during the next 116 days:

  • Volatility in rates as the market digests every ounce of news related to Trumps ability to manage the transition and get his initiatives going.  As news of certain bills gaining or losing traction hit the airwaves the markets will assess and quickly price.  It could get very sloppy out there.
    • Lesson:  Lock your loans the moment the borrower is committed and you have a complete package…and lock for longer (say 45 days versus 60).  Markets can move SO quickly during this that you’ll never be able to make up for an rapid 30 basis point sell off.
    • Educate:  Borrowers sitting on the fence would do well to understand the potential for increased costs in both home prices and mortgage rates.
    • FHA: Although we still await the naming of a new FHA Commissioner and we don’t quite know what Ben Carson will do, there is some probability we’ll get good news in terms of an MI cut for first time homebuyers and/or some credit relief for heavily indebted student loan borrowers.  A 50/50 chance I’d say.


  • Refi:  Prepare yourselves for what could well be a prolonged period of less refinance activity and much higher rates (4.5% - 5.0% mortgage rates).  Core Logic published a memo before rates hit their highs which stated 60% of those eligible for a refi would no longer qualify…and of the folks left the real question is why didn’t they refi when they had the chance for the last 4 years?  So in all likelihood those many of folks are not real candidates anyway.  So make sure you understand your true breakeven production level with less refi loans in your pipeline.
  • Purchase:  Not doing enough purchase loans?  Get trained, use AnnieMac Worx, get a coach, set goals, hold yourself accountable and be patient.  See Christine Beckwith and Bobby Welch for all of that.
  • Renovation:  While Renovation can never replace the sheer size of the refi market it’s pretty clear inventory issues nationally and increasing home prices make this product somewhat of a layup in terms of adding new business.  It’s also a niche most aren’t good at…but luckily we are.  However this product isn’t for the faint of heart and it’s also not something you can learn overnight. So if you really care about customer service get properly trained before you begin marketing is key.  See Jeff Onofrio about all of this.

So in my opinion we enter what could still be a very productive origination environment for the right MLO’s and the proper platform.  Incomes are more important than interest rates when it comes to home purchases, a strong economy is always good for housing, home builders are coming back online, rent is gruesomely expensive in many areas, and some form of credit relief for 1st time home buyers is likely to create some additional demand.  So you can still thrive in this operating environment if you make the changes necessary and hold yourselves and your teams accountable for what it takes to adapt quickly.
Thank you! 
Economic News/Activity:

Date Time Event Period Survey Actual Prior Revised
1/3/2017 9:45 Markit US Manufacturing PMI Dec F 54.2 54.3 54.2 --
1/3/2017 10:00 ISM Manufacturing Dec 53.8 54.7 53.2 --
1/3/2017 10:00 ISM Prices Paid Dec 55.5 65.5 54.5 --
1/3/2017 10:00 ISM New Orders Dec -- 60.2 53 --
1/3/2017 10:00 ISM Employment Dec -- 53.1 52.3 --
1/3/2017 10:00 Construction Spending MoM Nov 0.50% 0.90% 0.50% 0.60%
1/4/2017 7:00 MBA Mortgage Applications 30-Dec -- -- -- --
1/4/2017 14:00 FOMC Meeting Minutes 14-Dec -- -- -- --
1/4/2017   Wards Domestic Vehicle Sales Dec 13.70m -- 13.85m --
1/4/2017   Wards Total Vehicle Sales Dec 17.70m -- 17.75m --
1/5/2017 7:30 Challenger Job Cuts YoY Dec -- -- -13.00% --
1/5/2017 8:15 ADP Employment Change Dec 175k -- 216k --
1/5/2017 8:30 Initial Jobless Claims 31-Dec 260k -- 265k --
1/5/2017 8:30 Continuing Claims 24-Dec 2051k -- 2102k --
1/5/2017 9:45 Markit US Services PMI Dec F 53.4 -- 53.4 --
1/5/2017 9:45 Markit US Composite PMI Dec F -- -- 53.7 --
1/5/2017 9:45 Bloomberg Consumer Comfort 1-Jan -- -- 46 --
1/5/2017 10:00 ISM Non-Manf. Composite Dec 56.7 -- 57.2 --
1/6/2017 8:30 Trade Balance Nov -$44.5b -- -$42.6b --
1/6/2017 8:30 Revisions: Seasonally Adjusted Household Survey Data          
1/6/2017 8:30 Change in Nonfarm Payrolls Dec 180k -- 178k --
1/6/2017 8:30 Two-Month Payroll Net Revision Dec -- -- -2k --
1/6/2017 8:30 Change in Private Payrolls Dec 170k -- 156k --
1/6/2017 8:30 Change in Manufact. Payrolls Dec 0k -- -4k --
1/6/2017 8:30 Unemployment Rate Dec 4.70% -- 4.60% --
1/6/2017 8:30 Average Hourly Earnings MoM Dec 0.30% -- -0.10% --
1/6/2017 8:30 Average Hourly Earnings YoY Dec 2.80% -- 2.50% --
1/6/2017 8:30 Average Weekly Hours All Employees Dec 34.4 -- 34.4 --
1/6/2017 8:30 Labor Force Participation Rate Dec -- -- 62.70% --
1/6/2017 8:30 Underemployment Rate Dec -- -- 9.30% --
1/6/2017 10:00 Factory Orders Nov -2.30% -- 2.70% --
1/6/2017 10:00 Factory Orders Ex Trans Nov -- -- 0.80% --
1/6/2017 10:00 Durable Goods Orders Nov F -4.60% -- -4.60% --
1/6/2017 10:00 Durables Ex Transportation Nov F -- -- 0.50% --
1/6/2017 10:00 Cap Goods Orders Nondef Ex Air Nov F -- -- 0.90% --
1/6/2017 10:00 Cap Goods Ship Nondef Ex Air Nov F -- -- 0.20% --

AnnieMac Home Mortgage chipped in to make the holidays special for some area kids during the Culture Committee’s 6th Annual Toys for Tots Campaign.

According to Kathleen Dixon, AnnieMac employees contributed 70 toys in the bins placed around the offices from Nov. 9 to Dec. 9 — everything from Star Wars action figures, to toy cars and trucks, to dolls, to educational toys.

The national Toys for Tots program, run by the United States Marine Corps Reserve, collects new, unwrapped toys, which are distributed to children in the community whose parents cannot afford to buy them gifts. AnnieMac was working with the Marine Corps League, Burlington County Detachment No. 695.

“It feels great that we are able to help bring smiles to children in our community," Kathleen said.

Kevin Dolan Among '40 UNDER 40'

Nov 30
Category | General News

National Mortgage Professional Magazine has announced that Kevin Dolan, manager of the Mountain Lakes, N.J., branch, will be included on the magazine's "40 Under 40" list for 2016.

According to the magazine, that places Kevin among "the top mortgage professionals under the age of 40, as voted on by their peers, who exemplify professionalism and top production in today’s housing market."

AnnieMac is no stranger to that list, which last year included National Director of Sales Vincent Ingui.

Kevin joined AnnieMac in 2012. Landy Garcia, who came aboard as Kevin's co-manager at that time, described him as a "true professional" who leads by example.

 "Kevin has a tremendous work ethic and embraces the team culture," Landy said. "In our office, we work as a team. No one works for us, and Kevin goes the extra mile to make our staff feel that way.  Kevin is self-driven and motivating to the entire staff."

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