Mortgage Market News and Insight

For the Weekend of March 16^th, 2024

 

Hawaii’s Most Read Mortgage Publication for 16 Years

 

Volume 16 – Issue 28

Let’s Get Organized!

If you’ve read my weekly newsletter for any length of time, you’ll know that one of the goals is to give you the consumer a peak behind the curtain of how lenders do what they do with your application and documentation.  If you present a mess of unorganized documents to your lender it will cause delays.  Loan Originators, Underwriters, and Loan Processors are human.  If they have a choice between a mess and an organized set of documents, the truth is they will always reach for the organized application.  Your mess may cause delays and could jeopardize your transaction.

 

Let’s take a page from Marie Kondo and put some joy into getting your financial documents in order!

 

Step 1 – Digitizing

If you are still operating in the 1970’s and have all your statements mailed to you – stop doing it.  Not only does it open you up to potential theft of your personal information, but other than holding it in your hand, it’s inefficient to share.

 

You should contact your financial institutions, credit card companies, and anyone else you get statements from and ask that you receive emailed digital copies instead.  You might get lucky that your current and old statements have already been stored on their website and are available for you to download.

 

If all you have are paper statements, I’ll bet you have a cell phone with a camera.  While us in lending dread pictures, a few is better than not obtaining that document we need for your approval.  If you must take a picture of a document with your phone, lay the paper flat on a table, and position the camera to capture the entire page without cutting anything off.  But don’t take it so far away one cannot make out what the page says!

 

This photo is an actual document we received from a client.  Don’t bother trying to zoom in, the more you enlarge the photo, the grainier it gets.  It’s safe to say we couldn’t use this at all.  The process got delayed because we had to call the client and ask them to send a better copy.

 

There are also free apps for both Apple and Android that will take that picture and turn it into an Adobe Acrobat document.  If you must use your camera on your phone, install one of the free apps before you start.

 

If you have multiple documents, it would really be worth your time to sort them all out and drive to Kinkos and have someone there quickly scan them for you and place onto a USB storage device.

 

For documents such as tax returns, call your tax preparer and ask them to send you an Adobe Acrobat version of your tax returns.  They can email them directly to you with a password for security.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Step 2 – Organization

Grasp the concept of a digital filing cabinet.  Each drawer will have documents based on different categories of your financial life.  Within each drawer you will have different folder for the varied sources of documents relating to that subject.

 

This screenshot to the left is a great template for you to follow.  It separates out into separate drawers your bank statements, subject property documents (for a refinance), income documents, investment property documents, pension documents, and trust documents.  And then within those drawers you have folders for the various items that make up that section.

 

If you have not already set something up on your computer that functions like this, you should get this done now.  Don’t wait for the idea of buying a property to motivate you to start.  Not only does this system work for your mortgage application, but if anything were to happen to you, your spouse or children could easily access these documents.

 

One folder not included here is a folder for life insurance policies.  We don’t need them for mortgage lending, but since you are organizing your financial life, if you have them, digitize them too.

 

Another folder I didn’t include because it has nothing to do with obtaining a mortgage is a folder for pictures of jewelry, art, and other expensive items in your home.  Pictures of these items are a good idea of have in case of theft or fire.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Step 3 – Back-up

Now that you’ve moved your life to a digital world, you need to make sure that data is backed up.  Every hard disk on every computer will fail at some point.  To protect yourself, use the 3-2-1 method.  This method may sound like going overboard, but it’s easy to do, and once you set it up, you’ll never have to worry again.

 

The “3” refers to 3 copies.  The “2” means to different media types.  And the “1” signifies one off-site (cloud) backup.

 

Let’s make this easy.

 

When you have all your documents on your computer in the organized folders like above, copy those files onto a USB storage device and keep that device in a safe place that’s easy to get to.  You should also spend a few dollars a year for a cloud backup service for your computer.  When you’re not working on your computer, it will automatically backup your files to the cloud.

 

If you’re backed up to the cloud, why would you need another copy like on a USB memory stick?  In case of a natural disaster, you may not have internet service.  Having that USB device with you could help file claims or get you access to your documents faster.  It’s also handy for those coming to Hawaii to buy a property.  Think how easy it would be that if you found that perfect property you could meet your lender and have every document needed sitting in your pocket.

 

In summary, get organized!  It will not only make your mortgage transaction run smoother, take less time, and eliminate your frustration, but it could also help you out in so many other ways, especially in times when the last thing you want to do, or have your loved ones do, is to go hunting for documents.

 

 

 

 

 

And now the week’s economic news…….

 

High Inflation

Stronger than expected inflation data was negative for mortgage markets this week.  A shortfall in consumer spending was a distant second in importance to investors, and mortgage rates ended the week higher.

 

The Consumer Price Index (CPI) is one of the most widely followed inflation indicators.  To reduce short-term volatility and get a better sense of the underlying inflation trend, investors typically look at core CPI, which excludes the food and energy components.  In February, Core CPI rose 0.4% from January, above the consensus forecast and 3.8% higher than a year ago.

 

Although the core CPI annual rate has fallen from a peak of 6.6% in September 2022, it is still far above the readings around 2.0% seen early in 2021, which is the stated target level of the Fed.  One big reason is that shelter (housing) costs remained elevated and again were responsible for the largest portion of the increase.  However, the CPI data measures shelter costs with a lag, and more timely indicators from other sources suggest that this component will slowly come down later in the year.  Other categories with large monthly increases included airline fares, apparel, and auto insurance.

 

Adding to the inflation concerns, another indicator released this week which measures costs for producers was also higher than expected.  The core Producer Price Index (PPI) rose 0.3% from January, above the consensus forecast of just 0.2%.  Due to the higher-than-expected inflation reports this week, expectations for a reduction in the federal funds rate have been pushed out until even later in the year.  Investors now anticipate that the first rate cut will not take place until June or July.

 

After posting large declines in January, consumer spending picked up in February, but by less than expected.  Retail sales rose 0.6% from January, below the consensus forecast for an increase of 0.8% and the results for the prior month were revised lower as well.  The strongest rebound in spending was seen in motor vehicles/parts, electronics, appliances, and building materials.  Retail sales, which are not adjusted for inflation, were just 1.5% higher than a year ago, below the rate of price increases over that time frame.

 

 

 

 

Next Week

The next Fed meeting will take place on Wednesday.  No change in rates is expected, and investors will focus on the latest forecasts from officials for monetary policy and economic activity.  For economic reports, the spotlight will be on the housing sector.  Housing Starts will be released on Tuesday and Existing Home Sales on Thursday.

Until next week…….