Happy Friday! We are finishing up our first week of the Non-QM upgrade and momentum keeps growing for our Non-QM products.
Page 3 of the Non-Agency rate sheet has our second most popular program, DSR Direct, for the professional investor. The program is not too different from its predecessor Investor Direct, except that we removed the full doc and bank statement option. The No Ratio and DSCR below 1.00 have also been removed from the rate sheet. Those options are all still available – Full Doc and Bank Statements have been moved to Prime Direct, Credit Direct, and Income Direct. And No Ratio and DSCR below 1.00 are still readily available as exceptions, but I’ll give you a hint on that possibility… we’ll want a prepay on those loans. There are even more positive changes to the program:
- Removed the 3/1 & 10/1 ARM options. Added the 30 year fixed option for borrowers looking for longer term security. The 5/1 ARM is now the best priced option.
- All programs allow interest only up to 75% LTV – even the 30 year fixed. However, it is a 30 year total amortization unlike the other programs that allow a 40 year amortization on interest only products. The good news is the borrower is qualifying off the ITIA and the cash flow of the property.
- Improved the incentive for DSCR over 1.25%. Remember we qualify based on ITIA for interest only loans, increasing the likelihood of qualifying over 1.25% DSCR.
- No loan amount adjustments. $100,000 is priced the same as $3,000,000.
- Rate sheet uses no prepay pricing, but if prepays are allowed in the state it is definitely recommended to quote using a minimum 2 year prepay. That will keep the DSR Direct price very competitive.
Stocks held their gains after August jobs report showed a slight dip in hiring as employers added fewer jobs than anticipated. The U.S. added 130,000 jobs in August and the unemployment rate remained unchanged at 3.8%. The jobs number has increased expectations for a second straight Federal Reserve interest-rate cut. Elsewhere, China’s central bank reduced reserve requirements for lenders, marking a fresh effort to support their economy.
Bond prices are relatively flat, and the 10-Year Treasury is yielding 1.56%. The biggest news today came from the jobs number, where the U.S added less than expected in August. The data suggests bigger cracks are beginning to form in the labor market, which could greatly impact consumer spending down the road. The U.S. expansion is becoming increasingly dependent on solid job gains that in turn power consumer spending. Concerns about a recession have intensified due to weakness in the manufacturing sector, partly from the trade war and slowing global economy. It is likely calls grow for the Fed to cut interest rates this month by even more than a quarter point.