As the public preference shifts to adjustable-rate loans, mortgage banking companies have been rushing an array of new models to market.
The latest are from Fleet Mortgage Group, Columbia, S.C., and Plaza Home Mortgage Bank, Santa Aria, Calif.
The new models at Fleet include three-, five-, and seven-year ARM programs that meet agency guidelines, as well as five- and seven-year loans that exceed the agency ceiling. The loans are at fixed rates for their initial term, then convert to one-year adjustables.
"With the runup in rates over the first half of the year, a lot of consumers have been looking into adjustable-rate mortgages," said Gary K. Bettin, executive vice president, production, secondary marketing and operations. "We believe these new products will appeal to prospective homebuyers who are looking for alternatives to traditional fixed-rate mortgages."
A Refocus on Loans
Lenders have refocused their attention on loans to buy homes in recent months as the refinancing wave subsided.
Fleet Mortgage, with 90 branches throughout the country, is publicly owned but 80% of its shares are held by Fleet Financial Group.
At Plaza, the new offerings are a low-clown-payment adjustables keyed to the average yield on Treasuries, and conventional ARMs pegged to Treasuries and Libor.
The low-down-payment model, called Startsmart, assists first-time homebuyers by allowing them to contribute 3% of their down payment and to get another 2% from a family member, government agency, or nonprofit organization.
The seller may not contribute to the 2% portion, but can pay closing costs, including those that have been prepaid.
"Startsmart is directed at people with the ability to make monthly mortgage payments but are restricted when it comes to down payments," said Nef Bromber, Plaza's vice president and sales director.
It is available for owner-occupied, primary residences only, and for loan amounts from $30,000 to $203,150. Each annual rate adjustment is capped at 2%. with a lifetime cap of 6%. The index is tied to the weekly average yield of U.S. Treasury securities.
The two. other ARM loans offer high loan-to-value ratios, flexible condo terms, cash-out refinances on second homes and investment properties, and low reserve requirements.
$300,000 Loan Limit
Both allow loans up to 95% of value up, with a maximum size of $300,000 for owner-occupied, single-family detached residences only.
The interest rate cap on the Treasury ARM is 2% annually, based on the weekly average yield of U.S. Treasury securities. For the Libor ARM, the initial rate adjustment takes place after six months and is adjusted every six months.
Fannie Mae also announced last week that it would be buying additional types of adjustables. They are a loan with a 10-year fixed period followed by annual adjustments, and one indexed to Libor that is adjustable every six months.More Choices in ARMsTwo top lenders expandtheir adjustable-rate lines COMPANY:Fleet Mortgage GroupHEADQUARTERS:Columbia, S.C.NEW OFFERINGS:Loans with fixed rates for three,five, or seven years that thenconvert to one-year adjustablesCOMPANY:Plaza Home MortgageHEADQUARTERS:Santa Ana, Calif.NEW OFFERINGS:One-year Treasury and six-monthLibor ARMs with small downpayments for home purchases