Tuesday, September 30, 2008

September Recap

RECAP for the month of...
Month end again... seems like I JUST did a month end recap...where does the time go?

Here's a recap of the articles I posted this month:

FHA MIP effective 10/1/09

FNMA says 2 years after Short Sale

FNMA & FHLMC under conservatorship

Cities Likely to See Increase

Shopping Rates

Attn: COLORADO! CHFA continues!

Stopping "Buy and Bails"

Anyone Selling Hot Dogs?

Bail Out was a Bust

Bail Out was a BUST!

In light of all the recent turmoil regarding the failed bailout, I wish to share just a few points with you that were made in a rather lengthy email sent to us this morning from Bill Starkey, the owner of WR Starkey Mortgage:
  • The initial plan has failed but that just means that our politicians must go back to the drawing board and draft a plan that is acceptable to all parties.
  • Although we do not have a Bailout Plan in place, the US Government is still taking care of the issues on a case by case basis and they will continue to do just that.
  • Until a Plan is reached, you are going to see ups and downs in the stock market as well as all financial sectors.
  • Our industry has caused the majority of this mess in that Sub-Prime Mortgages sit at the center of it all.
  • Hence, the Real Estate Industry and Mortgage Industry have seen a great amount of recent slowdown because a great amount of change is currently being initiated so that this does not ever happen again.
  • Unfortunately many Banks as well as other major firms and individual investors have been put in financial hardship because of the investment in Sub-Prime Mortgages.
  • Also remember that we have a Presidential Election in progress and this will definitely have an impact on the successful completion of a Bailout Plan.

    "I felt confident that the first run at a Bailout Plan would not be successful but I also feel certain that our Government will go back to the drawing board and put a more intelligent plan in place that will be more of a benefit to our economy in the long run. In other words, sometimes taking your time and getting something done in intelligent fashion is better than rushing out to put a plan in place that has a great number of snags. I have to be honest in telling you that the initial Bailout Plan was not very attractive and I think it will beneficial to go back to the drawing board and try again........."

    Mr. Starkey followed up in a second email by adding:

    "There are a few additional comments I would like to make regarding the current situation in the United States Economy. First and foremost, we have plenty of homes for sale in the current market and buyers are finding many opportunities to purchase homes at lower prices today because of the increased inventory. Hence, there is still a great demand for mortgage loans but that is also being countered by the fact that mortgage firms are not going to make loans to people just because they are breathing. The industry has tightened up and will go back to the traditional method of only approving people who can afford to buy a home. Furthermore, mortgage firms are and will continue to be going out of business left and right because their specialty was making loans that made no sense and taking advantage of the borrower by charging them ridiculous rates and points. Believe it or not, this provides an opportunity for firms like WR Starkey Mortgage because we focus on providing exceptional service to quality borrowers at a fair price. Hence, we fully intend to be one of the survivors of this economic downturn and grow strength as the market turns around over the next year or two. ...

    "In closing, I feel as if our company has a wonderful opportunity in a down market because we are filled with class and character which will allow us to further dominate our markets. Make no mistake about it.....there are homes being sold and home financing is still a necessity in this market......we simply need to continue focusing on those builders, Realtors and other referral sources to earn the business."

Friday, September 12, 2008

CHFA Money Continues!

This statement was issued by CHFA confirming there was no effect on their mortgage programs as a result of the passing of the Housing and Economic Recovery Act of 2008, H.R. 3221 on July 31, 2008:

"There is a provision in the bill that eliminates the Seller Funded Down Payment Assistance Programs beginning October 1, 2008. This does not impact the optional down payment provided by CHFA’s Second Mortgage Loan Program, only available with any CHFA program. The CHFA Second Mortgage Loan Program continues to be offered at 0% interest and deferred for all qualified CHFA borrowers now and after October 1, 2008.

Please be aware H.R. 3221 is a very robust and complex piece of legislation. CHFA is currently evaluating the bill and will release announcements through our eNews as well as on a special section of our website at: http://www.chfainfo.com/news/HR_3221.icm."

We are watching closely to see whether CHFA will be adjusting their second mortgage from 3% (the current required FHA down payment), to 3.5% (the new FHA required down payment scheduled to go into effect January 1st). We'll keep you updated...

Tuesday, September 9, 2008

FNMA & FHLMC under Conservatorship!

The following email was received by Bill Starkey, Owner and CEO or WR Starkey Mortgage this morning:

The Federal Government has placed both FNMA and FHLMC under conservatorship as of this past weekend. While many will have an immediate reaction that appears to be negative, this is the best possible solution that we could have hoped for as it relates to the mortgage industry. To understand this process in detail, you must first understand how the mortgage industry operates on a day-to-day basis...........

Fannie and Freddie both purchase home loans from financial institutions and then repackage those loans as mortgage-backed securities that they either hold on their own books or sell to investors around the globe. This process provides financial institutions with more money to make more home loans, greatly expanding home ownership. In other words, WR Starkey Mortgage makes home loans and eventually many of these same mortgage loans are purchased by FNMA or FHLMC and then placed into mortgage backed securities which investors can invest in just as an investor would invest in stocks.

The issue that has come up over the past few months is that investors have been hesitant to invest in these securities due to the falling housing markets and failing mortgage loans. The other major concern with investors has been the financial liquidity of FNMA and FHLMC themselves. The companies, which together own or guarantee about $5 trillion in home loans, about half the nation's total, have lost $14 billion in the last year and are likely to pile up billions more in losses until the housing market begins to recover. So the US Government is simply protecting FNMA and FHLMC from failure and thus giving investors around the globe the confidence to once again invest in mortgage backed securities.

What most people do not realize is that the failure of the two agencies named above would have caused a global tragedy that would have affected investors throughout the world. This move has eliminated this threat and should lower rates over time as well as provide assistance in correcting the current housing slump. However, please note that the current housing slump will not be cured over night and we will continue to see mortgage firms close their doors as they cannot continue to make money when their loan production is falling. These changes are a positive for WR Starkey Mortgage in that we are still focused on growth while others lick their wounds. The difference is that we now have the US Government standing behind the two largest mortgage investors which will provide stability in the US Housing markets.

There is obviously much more detail that is involved in the above stated changes but this should at least give you some basic knowledge to help you understand what happened and the effect on our industry.

Wednesday, September 3, 2008

FNMA says TWO years after Short Sale?

For clarification on what FNMA really says vs what investors are doing, click here:

Tuesday, September 2, 2008


Remember that saying, "If you don't like the weather, stick around and it'll change"?? Seems like that can be modified to "Don't like the rule? Stick around awhile and it'll change"!!

Well, here we go AGAIN!

All FHA case number assignments made on or after October 1, 2008 and before October 1, 2009 will be charged mortgage insurance upfront and monthly premiums according to the following chart: FHA MIP

Hold on before you commit this chart to memory as October 1, 2009, risk based premium pricing will go into effect. However, we don't know what those factors are at this time. (Probably will find out just prior to the change!)