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What’s Ahead For Mortgage Rates This Week – September 16th, 2024

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The week for the Federal Reserve’s rate decision has finally come. This is the week everyone has been waiting which will decide whether we will see any rate cuts this year. There has been a lot of speculation that this will be the first rate cut and likely more in the future. With the Federal Reserve giving hints the data has been on track, the outcome of one seems very likely. With the previous week’s CPI and PPI statistics coming in, which both were slightly warmer than expected, the data still largely shows that inflation has been kept under control. This may affect the decision, but ultimately throughout the year, the data has been consistent with few surprises. The week rounded out with the Consumer Sentiment data reports showing favorable results, indicating that the current state of the economy is in a neutral position in the eyes of the average consumer.

Producer Price Index

U.S. wholesale prices showed a mild increase in August and reinforced the idea the rate of inflation is returning to low pre-pandemic levels. The moderate increase in wholesale costs follows a similarly mild rise in consumer prices last month. With inflation slowing, the Federal Reserve is widely expected to cut interest rates next week.

Consumer Price Index

The consumer price index rose a mild 0.2% in August, the government said Wednesday, in line with The Wall Street forecast. Yet a measure of prices that strips out volatile food and energy costs, known as the core rate, rose a somewhat stiffer 0.3%. That was a tick above the forecast and matched the biggest increase in five months.

Consumer Sentiment

The rise in sentiment, 0.54%, is the highest since May. Consumer sentiment rose to a four-month high in September, just ahead of the U.S. presidential election, as expectations about future inflation fell to the lowest level since 2020. Yet Americans are still “guarded” in their views about the economy.

Primary Mortgage Market Survey Index

  • 15-Yr FRM rates saw a decrease of –0.20% with the current rate at 5.27%
  • 30-Yr FRM rates saw a decrease of -0.15% with the current rate at 6.20%

MND Rate Index

  • 30-Yr FHA rates saw a 0.01% increase for this week. Current rates at 5.68%
  • 30-Yr VA rates saw no change for this week. Current rates at 5.69%

Jobless Claims

Initial Claims were reported to be 232,000 compared to the expected claims of 230,000. The prior week landed at 228,000.

What’s Ahead

The FOMC Rate Decision will take place on Sunday of this upcoming week. 

Understanding Cross-Collateralization in Mortgage Lending

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In the world of mortgage lending, borrowers may come across a variety of terms and concepts that can be confusing. One such concept is cross-collateralization. While not as common as traditional single-property mortgages, cross-collateralization can be a powerful financial tool in certain situations. However, it also comes with unique risks that borrowers should understand. This article will explain what cross-collateralization is, how it works, and when it might be used in mortgage lending.

What Is Cross-Collateralization?

Cross-collateralization occurs when a borrower uses multiple properties as collateral to secure a single loan or several loans. In this arrangement, the lender has the right to seize more than one property if the borrower defaults on the loan.

For example, let’s say you own two properties, Property A and Property B, and you want to take out a loan. Instead of using only one property as collateral, you use both Property A and Property B to back the loan. If you default, the lender can foreclose on both properties, even if the loan was originally tied to just one of them.

How Does Cross-Collateralization Work in Mortgage Lending?

In typical mortgage lending, each loan is secured by a single property. Cross-collateralization, on the other hand, ties multiple properties to one or more loans. This approach is often used in commercial real estate, business loans, or investment property portfolios, but it can also apply to residential mortgages.

There are two common scenarios where cross-collateralization might come into play:

  1. Securing Additional Loans: If you already have a mortgage on one property and want to take out a new loan on another property, a lender might require cross-collateralization. This means both properties are used as collateral for both loans, increasing the lender’s security.
  2. Consolidating Debt: Cross-collateralization can also be used to consolidate multiple loans into one. Instead of managing several different mortgages or debts, a borrower might consolidate them into a single loan, secured by multiple properties.

The Benefits of Cross-Collateralization

For borrowers, cross-collateralization can offer several advantages:

  1. Access to Larger Loans: By pledging multiple properties, you may be able to secure a larger loan amount than you could with a single property as collateral.
  2. Potential for Better Terms: Cross-collateralization reduces risk for the lender, which may lead to more favorable loan terms, such as lower interest rates or extended repayment periods.
  3. Increased Flexibility for Investors: For real estate investors with multiple properties, cross-collateralization allows them to leverage the equity across their portfolio, giving them more options for financing additional investments.

The Risks of Cross-Collateralization

While cross-collateralization can provide financial benefits, it also comes with significant risks:

  1. Increased Risk of Losing Multiple Properties: The biggest downside is the risk of losing more than one property if you default on the loan. Since multiple properties are used as collateral, a default could lead to foreclosure on all of them, not just one.
  2. Complicates Selling or Refinancing: If you want to sell one of the properties tied to a cross-collateralized loan, the process becomes more complicated. You’ll likely need the lender’s approval, and they may require that the loan is paid off or restructured before releasing their claim on the property.
  3. Limited Flexibility: Cross-collateralization can tie up your assets, limiting your financial flexibility. You may find it harder to refinance or use the equity in your properties for other investments.

When Is Cross-Collateralization Used?

Cross-collateralization is typically used in situations where borrowers need access to larger amounts of capital or are dealing with multiple properties. This can include:

  • Real Estate Investors: Investors with multiple properties might use cross-collateralization to finance additional purchases or to consolidate existing debts.
  • Business Owners: Business owners who own real estate may cross-collateralize their properties to secure financing for business expansion or operational expenses.
  • Borrowers with Limited Equity: If a borrower doesn’t have enough equity in one property to secure a loan, they may use cross-collateralization to leverage multiple properties.

Cross-collateralization can be a useful strategy in mortgage lending for certain borrowers, particularly those with multiple properties or complex financial needs. However, it comes with added risks, including the potential loss of multiple assets in the event of default. As with any lending strategy, it’s important to carefully weigh the pros and cons and consult with a financial advisor or mortgage professional before deciding whether cross-collateralization is right for you. 

What Borrowers Need to Know About Mortgage Rate Locks

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When it comes to securing a mortgage, timing is everything—especially when it comes to locking in an interest rate. Mortgage rates can fluctuate daily, and even a small change can have a significant impact on your monthly payments and the total cost of your loan. To protect yourself from rising interest rates while you’re in the process of buying a home or refinancing, you can use a mortgage rate lock.

What Is a Mortgage Rate Lock?

A mortgage rate lock is an agreement between a borrower and a lender that locks in a specific interest rate on a mortgage for a set period, typically ranging from 30 to 60 days. During this period, no matter how much market interest rates change, the rate you’ve locked in remains the same.

For example, if you lock in a rate of 5% for 30 days, even if rates rise to 5.5% during that time, you’ll still pay 5% as long as you close on your loan within the lock period.

How Does a Rate Lock Work?

The mortgage rate lock essentially “freezes” your interest rate during the home-buying or refinancing process. It’s particularly useful for borrowers who are concerned about potential rate increases but are not yet ready to finalize the loan.

Here’s how it typically works:

  1. Rate Lock Request: Once you’ve submitted a mortgage application and the lender has provided a rate quote, you can request a rate lock. Your lender will then agree to lock the interest rate for a specific period.
  2. Lock Period: The rate lock period typically lasts from 30 to 60 days but can vary based on the lender’s policies and your personal situation. If your loan doesn’t close within this timeframe, the lock will expire.
  3. Rate Lock Expiration: If your rate lock expires before you close on your loan, you may have to re-lock the rate at the current market rate, which could be higher or lower than your original locked rate.

Why Consider a Mortgage Rate Lock?

There are several reasons borrowers choose to lock in their mortgage rates:

  1. Protection Against Rate Increases: The most significant benefit of a rate lock is that it shields you from rising interest rates during the loan approval process. This can provide peace of mind, knowing that even if rates rise, your monthly payments will remain unaffected.
  2. Budget Certainty: By locking in your interest rate, you gain a clearer picture of what your monthly mortgage payment will be, which can help you plan your finances more effectively.
  3. Competitive Edge in a Rising Market: In a volatile market where rates are on the rise, locking in a low rate early can give you an advantage over other buyers or borrowers.

What Happens if Rates Drop After You Lock In?

One common concern with locking in a rate is what happens if interest rates drop after you’ve locked in. While a rate lock protects you from rising rates, it doesn’t necessarily allow you to benefit from falling rates—unless you have a float-down option.

A float-down option is an add-on feature offered by some lenders that allows you to lower your locked-in rate if rates drop before closing. However, this option usually comes with an additional fee, and not all lenders offer it, so it’s important to ask your lender about this possibility upfront.

The Costs of a Rate Lock

In most cases, locking in a mortgage rate is free, especially if the lock period is standard (30 to 60 days). However, longer rate locks—such as 90 or 120 days—may come with a fee or a slightly higher interest rate to compensate the lender for the risk of holding the rate for an extended period.

What Happens if You Need More Time?

If your closing process is delayed and you need more time than your rate lock allows, you have a few options:

  1. Rate Lock Extension: You can extend your rate lock for an additional fee, which is typically a percentage of your loan amount.
  2. Rate Relock: If your rate lock expires, you may be able to relock at the current market rate, though this could be higher than your original locked rate.

When to Lock in Your Rate

Deciding when to lock in your mortgage rate is a strategic move that depends on market conditions and how close you are to finalizing your loan. Here are a few tips to consider:

  • Watch Market Trends: If mortgage rates are trending upward, locking in your rate sooner rather than later can save you money.
  • Consider Your Closing Timeline: Make sure your rate lock period aligns with your expected closing date. If you’re unsure, it may be worth discussing a longer lock with your lender.
  • Evaluate the Costs: Be aware of any potential fees associated with longer lock periods or extensions, and decide whether they’re worth the peace of mind.

A mortgage rate lock is an essential tool for borrowers looking to protect themselves from rising interest rates during the home-buying or refinancing process. While locking in your rate offers security and peace of mind, it’s important to understand the terms of the rate lock, including its expiration and potential fees. Give us a call to ensure that your rate lock aligns with your financial goals and timeline.

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Equal Housing Lender


90 Almeria Ave #204
Coral Gables, FL 33134