Latest News

Heading into the home stretch of election season!!  

Right now, it’s a toss up.  Who will be victorious remains to be seen…Whoever the eventual next President is, we all have our work cut out for us.  The Federal Reserve lowered interest rates by .50% last month, but almost immediately, longer term treasuries started a rapid ascent back towards previous levels.  The 10 year treasury note has risen from the 3.60% rate at the time of the Fed rate cut, to today’s 4.25%.  This has had a dramatic effect on mortgage rates.  Rates have risen approximately .375%-.625% from the 5% range back into the 6% area.  What does the future look like for rates? We feel the Fed will continue to lower rates over the next year, but the effect of these rate cuts might be muted by the market.  We will have to wait and see how the market digests all the moving parts.   One of the reasons why the market might not be as connected to what the Fed does is due to the fact of the overhanging level of government debt.  Either candidate and eventual President will need to firmly embrace a more disciplined fiscal approach to government spending.  We can’t keep our eyes closed because this is a problem that can be continually kicked down the road.  We need to recognize and address the government debt.  Who is better to deal with this, remains to be seen…


On a more positive note, the economy continues to move forward in a positive direction.  Employment remains robust and inflation is coming down (albeit a tad slower than some people had hoped for..).  Real estate values remain firm with a “normal” volume.

Our customized mortgage platforms can be a valuable assist in the analysis of your current and projected real estate financing portfolio. Our expertise is in reviewing, strategizing, and formulating financing options to fit within your guidelines and provide an overall real estate financing game plan. We specialize in residential, commercial, apartment, and SBA financing at all price points and classes of properties. Centek can handle the most complex Tax Returns and are always pleased to run “What-If” Scenarios-- and are known for our “Out of the Box '' thinking and strategizing!

Have taken the liberty of listing below a few interesting underwriting concepts/guidelines—

A few Important Programs:

• Non Occupant co-borrower concept offers great flexibility at all price points

• Only 1 year tax returns accepted (instead of the usual 2 years)          (some programs)

• Asset Depletion for qualifying in lieu of tax returns

• Wide array of interest-only programs for increased cash flow

• Deduct alimony from income, rather than classifying as a debt (greater flexibility)

• Bank statement programs utilizing cash flow for qualifying

• Debt Service Coverage Ratio loans (DSCR) on investment properties (no tax returns. Qualifying based upon rental income)

• Reverse Mortgages- excellent vehicle for the correct situation (both 1st and 2nd mortgages)

• Apartment & Commercial loans tailored to specific needs
  
  
  
  We always welcome your contact anytime!

This week’s Federal Reserve 50 basis point robust cut sets the tone for lower mortgage rates!! Federal Reserve Chair Jerome Powell used the term “recalibrate” nine times during his question and answer session after the Federal Reserve cut rates. What should we take away from this? First and foremost, this interest rate cut had been telegraphed for quite some time and was already factored into the market. Mortgage rates roughly track the direction of the 10-year treasury note, which is outside the direct control of the Fed. In fact, mortgage rates worsened a small amount after the Fed announcement. The good news is that rates have gradually declined over the past six weeks, and many products are sub-6 %. 

What should we do as borrowers? We should understand the new mindset of the interest rate complex. Mortgage rates will slowly decline, manifesting with many small incremental ups and downs. It’s important for us to have loan packages completed and approved in order to take advantage of any dip in rates. Remember, any hint of inflation picking up, will likely put a damper on any short-term follow-through of rates going down substantially. This common cliche is appropriate ---"A bird in the hand is worth two in the bush”. 

Market projections are very volatile and all of us have “war stories”. None of us have clear insight as to where rates will be in the next 3-6 months. We strongly feel that the important factor is that we are preemptive and are ready to “pull the trigger” when appropriate. If rates move down more after we close, our company policy is to refinance at no cost to you. Historically, these market concepts will eventually translate to increased Real Estate prices at all price points. There are additional crucial forces, which are further fueled by extreme amounts of liquidity waiting on the sidelines. In addition, there is tremendous pent-up demand to acquire Real Estate, whether it is a startup home for a first-time buyer or an extremely sophisticated investor with extensive holdings. This is a positive indicator for Real Estate prices as well opening more financing alternatives! 

1 Unit $802,650 

2 Units $1,027,7503 

3 Units $1,242,2504 

4 Units $1,543,900 

With that said, Stay Tuned!!

We wanted to reach out with a quick update on the interest rate environment. Today’s employment report reflects a demonstrable slowdown in new job creation. The market is now fearful of a full-fledged recession vs. a “soft economic landing”. As a result, the equity markets are getting beaten down substantially. Money is leaving the equity markets for the bond market. Treasury yields are falling dramatically with the 10-year. Treasury bond yielding 3.82% as of this morning. To put this in perspective, the closing yield last Friday was 4.18%. A rate drop of this size is a big deal… 

The benefactor of the lower treasury yields will be the mortgage market. We are expecting to see rates start falling into the high 5% range in the next week or so. Our recommendation to our clients is to reach out to us so we can review your current mortgage and analyze if there is any potential saving with refinancing to a lower rate or even changing amortization terms from a 30-year loan to a 15- or 20-year loan. Also, be cognizant if one has a hybrid loan that might be adjusting in the next year or so. This could be an advantageous time to consider switching to a longer-term loan vehicle to ensure more stable and predictable payments. 

As always, we appreciate your contact and are always pleased to run “what-if” scenarios. 

Thank you from all of us at Centek Capital!!

Quick update for the summer real estate sales market, which is slightly slower, but prices remain resilient, with a few areas of the market experiencing slight declines. We feel many of the sales price reductions are due to overly aggressive listing prices compared to current comparables. After no movement, eventually, reality sets in with the seller, and the price of the property is reduced. 

We feel the market is taking a pause, waiting for interest rates to drift lower, encouraged by some Fed speak and the upcoming election. When rates retrace into the high 5% area, we feel this will open the market quite a bit for all price points. More property owners will entertain selling their properties, creating more inventory. 

Current mortgage rates have been stagnant in the mid-6 % range, depending on the details of the transaction, for quite some time. We have seen a slight reduction in rates with the alternative qualifying (Non-QM) products, from the high 6% area to the low 7% range. These Non-QM loans have a wide range of guidelines, which give tremendous flexibility to many self-employed borrowers rather than traditional Tax Return qualifying. 

Important concept-- Our 2nd TD Reverse Mortgage product allows the property owner to retain their low-interest first mortgage and obtain a reverse mortgage with cash out for liquidity. Payments are not made on this Reverse Mortgage, and is an excellent vehicle to obtain untapped equity in one’s primary residence. Interest accrues to the balance and most certainly adds up to the final payoff, but this is an excellent vehicle for borrowers who are considering selling their house in the three-to-five-year time frame. There is no prepayment penalty, so this loan can be paid off whenever is appropriate for the borrower. This program is designed for older borrowers. 

In the commercial / apartment loan space, we have some aggressively priced lenders, but in today’s current environment underwriting is extremely rigid across the board with all lenders. In light of this reality, escrows are usually for 45 - 60 days. Importantly, if one has an adjustable commercial or apartment loan that is rolling to market or is maturing, we are happy to review the existing loan terms, which frequently are not clear-cut. Be sure to give yourself 90 days of any loan maturity or loan adjustment to obtain a new loan. We have had positive results with a foreign country state bank that is a little more flexible with lower loan-to-value loans. 

As always, we welcome your contact and are pleased to run “What-if” scenarios and as our clients know we think “outside the box”. Our Pre-Approval and Approval letters are well received in the industry, and frequently, our clients prevail with our purchase letter based on our established name in the industry. 

We welcome your contact anytime and are always available! From all of us at Centek, have an enjoyable summer. 

Stay Tuned!!

Hard to imagine that graduation events are behind us and summer holiday plans are in full swing for so many. The overall significant element for the country is that the US economy keeps chugging along!!  Even though economists can interpret minor signs of the economy slowing, the macro picture remains broadly positive.  The elephant in the room is when will Chairman Powell and the Federal Reserve feel comfortable enough to start reducing for this year… Our feeling is that the Fed wants to cut rates, but pulling the trigger requires a bit more quantifiable economic information, such as weaker employment and declining retail and housing sales, helping move the needle down closer to the Fed’s projected inflation target rate in the low 2’s. We’ve experienced record-breaking tightening cycles in the last two years which have been a reality shock financially for many, especially the broad-based middle class. Our read is that even if inflation stays in its current range, a weak employment report in July might be enough of a catalyst to encourage the first rate cut after all the rate increases.

Let’s not minimize the November Elections and the inherent long-term effects on economic and tax policy in the next couple of years. This statement obviously has important ramifications.

The real estate market has remained buoyant throughout the first half of the year.  Purchase volume is considerably less after the initial thrust at the beginning of the year when mortgage rates were in the high 5% area for a short period of time. Important----There is still a fair amount of activity and prices have remained sticky with minimal price retraction.  Rates have been slowly declining, and we are hopeful that with a Fed rate cut within the next month or two, rates will migrate back into the high 5% range.  Rates in this area should create a stronger demand in the purchase market. There is a tremendous amount of pent-up demand at all price points that have been affected to a large degree of property owners having rates in the 2-3% range. These low interest rates and low payments have not encouraged the move-up buyers to stimulate the market, which historically is important. New household formation currently is the major source of buyer activity.

A brief update on certain lending areas that are important to the marketplace:

80% LTV up to $5,000,000

85% LTV up to $2,500,000

90% LTV up to $2,000,000.

96.5% LTV up to $1,149,825

Conventional loan amounts for 2-4 Units have also expanded:

Up to $2,163,000 Loan for a 4 Unit property

Up to $1,741,000 for a 3 Unit property

Up to $1,440,450 for 2 Unit Property

With the conventional loans, the underwriting is sometimes less restrictive and can help save a transaction. We also have a wide array of Reverse Mortgage products, which have become much more user-friendly. One product in particular is a 2nd Mortgage at 9.99% with no prepayment penalty. This is an excellent vehicle for retirement-age clients or borrowers seeking to raise additional cash without monthly payments (Interest accrues to the principal). This can be ideal for someone who is considering selling their house within the next 5 years.

Many clients have reached out as a result of their interest-only fixed period of time adjusting to a new principal and interest payment with a 23-year or less amortization. Needless to say, payment shock is an understatement.

Important, we are very knowledgeable in the Commercial and Apartment loan space and many of our borrowers have loans adjusting and/or maturing.

We feel that now is an important time to position Real Estate activity for potential year-end interest rate cuts which historically fuel the purchase market and the resulting increase in prices.

Stay Tuned!!