For over 18 years Justin Bayle has been providing quality mortgage products to his clients in the Greater Los Angeles area and throughout California. Justin is currently ranked in the top 100 loan originators for purchase mortgages nationwide, and serves as the branch manager for the Los Angeles Branch of New American Funding.
1) The federal reserve interest rates are near zero, but the interest rates banks are lending to borrowers are higher. What gives?
This is a great question and one I get every time the news reports that the “Fed lowered rates.” Funny I never get the question when the Fed raises rates. In reality, when you hear about the Fed moving rates they are referring to the Fed Discount Rate: the rate at which large financial institutions can borrow money from the U.S. central bank for a short period of time… and when I say short, I mean short: from the close of business one evening to the opening of business the next day!
Mortgage rates and prices are determined by the Mortgage Backed Security (MBS) market. This is a market similar to many other commodities where the MBS are bought and sold in bulk at varying prices. It’s an extremely complex market and while it is influenced by the activities of the Federal Reserve, rates do not move as a direct correlation of the Federal Reserve interest rates.
I could go on and on about this subject so feel free to reach out and we can have a coffee date on Zoom if you’d like more details!
2) How available is capital? Are there any particularly unique challenges in certain prices points?
Fairly quickly after the Covid-19 crisis went into full swing, mortgage markets experienced a liquidity crisis for a myriad of reasons. It was a perfect storm of mortgage rates dropping dramatically just as overall economic uncertainty escalated dramatically. Because of that, many lenders tightened credit standards and some stopped lending all together. However, there is still plenty of available capital for those who want to borrow. We are still offering extremely aggressive jumbo and Non-QM loan options in addition to the more traditional Fannie Mae, Freddie Mac and FHA loans.
3) Have you seen an increase in seller financing, and can seller financing be utilized with a traditional mortgage loan?
I have not seen an increase in seller financing yet, but I wouldn’t be surprised to see some increase going forward as a way to combat some of the lowered loan-to-value guidelines put into place recently. As long as the terms of the seller financing meet the requirements of the primary lender, it’s a great way to achieve higher leverage! I’m happy to provide guidance to a buyer and seller on how they may want to structure this.
4) What should buyers looking to borrow know for the next 3+ months?
I would boldly predict that we haven’t seen the bottom of the interest rate market. I really do believe that rates have further to run and will continue to slowly decline. With that said, I would not advise trying to time the interest rate market… much like any long-term investment, that’s a bad strategy and will ultimately be a frustrating experience that may never come to fruition. If you’ve found the right home, it’s an amazing time to strike as you can leverage the purchase very inexpensively. If you’ve been in your mortgage for some time and you think the rate may be above the current market, it’s a great time to review your refinance options and put a plan in place to grab a historically low rate.
5) What neighborhood do you live in, and what do you love about it?
I live in Eagle Rock with my wife and daughter. After living 8 years in a loft in Downtown LA, my wife and I moved here 3 years ago when we found out we were expecting. It’s a great family neighborhood with lots of cool architecture from sexy Mid-Century to historic Craftsman and impressive Mediterranean. We are just a short walk to Colorado Boulevard which has a bunch of great restaurants and eateries, coffee, boutiques, yoga and lots of great pedestrian activity like we enjoyed in DTLA. I’m certainly a fan and would recommend it!
If you’d like any additional info about mortgages or want to review any specific situations, all of my contact info is below. Happy to help!