The Neighborhood Community Development Mortgage Program, also from Wells Fargo, calls for a minimum 5 percent down with no income restrictions and a two-month reserve to cover taxes, mortgage and insurance.
TD Bank has its own easier to remember version of these programs, something they’re calling Right Steps.
“Mortgage insurance premiums are going up,” Hollensteiner noted, “so we’re designing a product that offers first time buyers an option to FHA.” Right Steps requires a cash investment of 3 percent of the purchase price by the borrower at an interest rate that is about an eighth of a percent less that other 30-year fixed rate mortgages. It does require private mortgage insurance but, unlike the FHA, requires no upfront premium.
At the other end of the buying spectrum, TD Bank is also seeing increasing demand across the board for jumbo loans for primary and second homes – loans that, in most parts of the country, exceed $417,000. Hollensteiner said those buyers are attracted by rates that are only slightly higher than non-jumbo rates, while some of them are using short term adjustable rate mortgages to save interest during the term.
Like TD Bank, Ulster Savings doesn’t keep all of its mortgages in its portfolio. Brian Matthews, vice president and director of residential lending, says that helps keep rates low.
“No bank could offer the rates we’re seeing today without the secondary market to help fund lending. Fannie Mae, Freddie Mac and the FHA account for about 90 percent of the sales of our mortgages. What’s critical is who is servicing your loan after the closing – who takes care of the escrow, who do you call if you have a question. For the majority of our loans, we originate and service them, even if we sell them on the secondary market. We keep that relationship with our customers.”
Matthews said Ulster Savings is seeing an uptick in activity for jumbo loans at its mortgage lending offices in Westchester and Suffolk counties. “There’s no secondary market for those, so we’re keeping most of them in our portfolio.”
He says there’s little activity on the big loans locally.
Ulster Savings Bank also offers a program for first-time homebuyers that, if a they’re willing to take their time, take classes and demonstrate their own willingness to save, can result in a Federal Home Loan Bank grant that quadruples the size of their down payment. It’s done in cooperation with SONYMA, the Federal Home Loan Bank and both Rupco and Hudson River Housing.
How long is the low-interest, low-price party going to last? No one can say. But TD Bank’s Hollensteiner said the end was inevitable. “It doesn’t take a PhD to know that,” he said. “The question is when. We expect the interest rate trend to go higher over this year even if the Federal Reserve continues to keep rates low over the next twelve to 24 months. And if the Federal Reserve stops buying mortgage backed securities, we expect to see rates going up more quickly.”
