We helped a two-income family purchase $1 million primary residence purchase with a loan of 80% of the purchase price. The family was looking for a very competitive 30-year fixed rate mortgage interest rate and needed to close in under 30 days.
Loan Terms
$8 million investment property purchase with 62.50% lender financing.
Insignia Mortgage underwrote the cash flow and approximate net equity in the borrower’s real estate holdings as well as verified down payment from several business bank accounts, including foreign bank holdings. The loan was made to a Limited Partnership with a foreign national as the general partner. The escrow closed in under 40 days.
Loan Terms
We recently helped a client who had already owned over 25 different tax entities and over 20 different properties to purchase a $8.5 million primary residence with 55% lender financing. Insignia Mortgage underwrote the cash flow and approximate net equity in borrower’s real estate holdings, and verified the down payment from several business bank accounts. A vesting structure was set up to a corporation with a foreign trust as the beneficiary.
Loan Terms
Insignia Mortgage recently closed on a $6 million second home purchase for a foreign corporate executive with 60% lender financing.
Insignia Mortgage worked with the client’s foreign legal counsel and US-based CPA to properly structure the purchase in a tax-efficient manner. The client purchased the home using an LLC with the buyer guaranteeing the loan. We helped the loan go through successfully despite not having U.S. income, credit or assets.
Terms
Each new first week of the month brings us the U.S. jobs report, and this week brings good news. New job creations came in a touch above expectations with 215,000 jobs created in March, above the 200,000 expected.
Within the report, the unemployment rate rose to 5% from 4.9%, the U6 number was 9.8% from 9.7%, and the Labor Force Participation Rate (LFPR) rose to 63% for the first time in two years. The uptick in both unemployment and LFPR was a result of more people entering the labor force, but unable to find a job.
On a macro level, experts are debating how long can the U.S. be insulated from and continue to outperform the rest of the world. The resiliency of the U.S. consumer and economy is second-to-none, but, in our highly interconnected world, it’s plausible to think the U.S. could experience some road bumps later in the year. It’s open to debate how bonds and interest rates will react. There are also questions as to which tools the world’s central bankers can use to effectively stimulate the global economy.
U.S. bonds continued to trade well this week as seen by the 10-year treasury note current yield, currently <1.800%. Technically, 30-year mortgage bonds are trading at resistance levels and we would not be surprised if interest rates moved higher in the U.S. given the ongoing positive economic data we’re seeing.
The Federal Reserve dialed back its outlook on the economy this past week and stated that they are unlikely to raise interest rates more than twice in 2016. Short-term interest rates were left untouched, which stoked the stock market and also led to lower yields on both the 2- and 10-year Treasury notes.
The challenge for the Fed is trying to balance these disparate elements: an anemic economic recovery, an improving job market (though with not much wage growth), and the ongoing global economic uncertainty.
With the stock market experiencing several good weeks of trading, the fear of a recession has diminished. Low-to-negative interest rates have further increased risk-taking. The 10-year Treasury note continues to trade well below 2.00% at 1.890%.
Technically, mortgage bonds continue to trade against resistance and we are biased towards floating interest rates at these levels. We are vigilantly watching the 2-year and 10-year Treasury note in the event that interest rates suddenly rise.
U.S. bonds yields continue to rise in response to positive economic data coming out of the U.S. along with a reinvigorated stock market and rallying oil. The 10-year U.S. Treasury yield, which is the benchmark for bonds, is now near 2% as global economic fears have subsided.
There was not much in terms of economic reporting this week. The big news came out of the European Central Bank (ECB), which announced increased economic stimulus to fend off deflation and to spur their economy.
All eyes will be on the Federal Reserve next week and on the outcome from the Federal Open Market Committee’s meeting. The feeling is the comments out of the Fed meeting will be hawkish, which is bad for bonds.
Technically, we are advising with caution to float interest rates and we are monitoring the 10-year note carefully to see if it edges beyond the psychological 2.00% barrier.
All eyes were on the February jobs report which came in better than expected this morning: 242,00 new jobs were created versus 190,000 expected. Unemployment remained under 4.90%. This overall positive employment report included a revision of 30,000 more jobs created in December and January put pressure on bond yields. With both the stock market and oil trading well again this week, mortgage interest rates responded by moving higher.
The positive jobs report coupled with a significant comeback in global equities has left the door cracked open for an additional Fed rate hike later this month. It is anyone’s guess what will happen, but the odds are increasing that a rate hike this year may be put back on the table.
Technically speaking, bonds have traded poorly, and we remain biased toward locking in loans with the 10-year U.S. Treasury note still trading well below 2.00%.
Insignia principals, Damon Germanides and Chris Furie were ranked #8 and # 5 out of the top 20 loan originators in the West for 2016, respectively, by National Mortgage News.
U.S. bonds are not having a particularly good day after a better-than-expected Personal Consumption Expenditures (PCE) reading, which excludes volatile food and energy. The PCE year-over-year reading came in at 1.70% which is approaching the Federal Reserve’s 2% inflation target.
Rising inflation indices are bad for bond yields and as expected, the U.S. bond market is responding with rising interest rates. Adding further pressure to bond yields was a poor 7-year U.S. Treasury Note auction which was met with tepid demand.
Other economic news Friday morning included the second reading of Q4 2015 GDP. This reading came in a bit better than initially stated with an upward revision to 1%.
Oil and stocks have had a good trading week and this is also adding pressure on interest rates. As money flows back into the equities markets and other “risk on” trades, interest rate yields tend to suffer.
Based on the current market conditions, we are biased toward floating interest rates as prices remain above technical support levels. However, we continue to float with caution.
