Talking About Loans

Buy Now? Or Roll The Dice?

2009-08-15T07:36:00.006-06:00

There is rumor of the tax credit being increased from

$8,000 to $15,000.

What should a buyer do? Buy now, or wait and see??

Even move up buyers are asking themselves that question right now thanks to the proposed legislation suggesting the amount be increased AND be extended to ALL HOME BUYERS!

For more information on proposed legislation and tracking of both bills

(Yep, there are TWO BILLS being proposed!!) visit:

www.BloggingAboutLoans.com

Only 110 shopping days left!

2009-08-12T23:41:00.004-06:00

The deadline is coming up quickly...to use the first time homebuyer credit, that is!

Don't forget: the purchase must be completed PRIOR TO December 1st.

For more information, click here: 1stXHOcredit

Stop This Nonsense! Right NOW!

2009-07-21T06:52:00.009-06:00

It's no secret that America has been hit hard by a credit crisis changing many facets of lending and real estate... some good changes, and some NOT! High mortgage delinquencies have captured the attention of Washington resulting in new regulations that have a dramatic effect on the way we do business - or WILL BE doing business. So get ready, we don't make the rules, but we have to play by them!

Specifically there are two pieces of legislation that will affect your closing dates on purchase transactions.

HVCC, or Home Valuation Code of Conduct:

I like to think of this one as "HAVOC" because that's exactly what it is causing with appraisals! The intent of this legislation, effective May 1, 2009, was to protect appraisers against undue influence from lenders and loan officers. No longer were lenders allowed to select the appraiser (conventional loans) nor could they have any conversations with the appraiser! The results of HVCC lead to increased appraisal fees and eliminated the ability to transfer appraisals between lenders.

HVCC also requires the borrowers receive a copy of their appraisal THREE DAYS prior to closing (waivers may be permissible if approved). The cost of the delay in ordering the appraisal, communicating with the appraiser, and meeting the delivery requirement prior to closing has slowed down the overall process as much as two weeks! Typically the delay is less, however it's important to allow sufficient time for such when writing your contracts.

MDIA, Mortgage Disclosure Improvement Act .

MDIA impacts the required delivery time for delivery of certain documents and should any changes to the contract or loan be made affecting the APR, could delay closing.

As of July 31, 2009, the following Truth In Lending (TILA) requirements must be complied with:

Appraisal or application fees cannot be collected for three days following delivery of upfront disclosures.
7 days must elapse between delivery of disclosures and closing.
If the APR changes, either up or down, more than .125% lenders must redisclose and wait another three days before the buyer can sign closing documents. Things that might affect the APR include a change in price, loan amount, rate, program, closing date and any change in fees.

WHAT NOW?

Lengthen your contract deadline dates. But most importantly, KNOW YOUR LENDER! There are no quick fixes by transfering files at the last minute to meet closing dates.

AND TAKE ACTION! MAKE CALLS! SUPPORT HR 3044!

Please call your Representatives today and urge them to cosponsor H.R. 3044. The bill was introduced by Representatives Childers (D-MS) and Miller (R-CA) and it calls for an 18 month moratorium on the Home Valuation Code of Conduct (HVCC).

Introduced Jun 25, 2009. Currently referred to Committee. View Committee Assignments .

Call your Senators, Representatives and Governors: Click here for contact information.

Also, please contact your local TV and Newspaper outlets.

Below are talking points and background information to assist in your conversations. For the most successful and influential calls, it is important to concisely quantify how the HVCC is affecting your consumer and your business.

Talking Points:

NAMB conservatively estimates (breakdown below) that the HVCC is costing consumers over 2.8 BILLION dollars a year in extra fees, created by long delays (extended lock-in fees) and higher appraisal costs.
Unregulated Appraisal Management Companies (AMCs), who have been the subject of several misconduct investigations, are the centerpiece of the HVCC. The original Cuomo investigation involved a federally chartered bank and an AMC.
AMCs are driving honest appraisers and mortgage brokers from business, eliminating competition, increasing costs to consumers and reducing state revenue. The HVCC is causing significant delays in real estate transactions, hurting real estate agents, title companies and other third parties reliant on turnaround time.
HVCC does nothing to reduce fraud, as it legitimizes the same failed model, which was the subject of Attorney General Cuomo's investigation.
No Portability! Consumers are "trapped" with a specific lender. If a better deal becomes available with a different lender, the consumer is forced to pay for another appraisal.

Additional background for points of discussion:

1. Lack of Portability: Lenders are not allowing borrowers to transfer appraisals, regardless of the reason. Forces the borrower to pay for another appraisal and wait for a new appraiser to be assigned and complete it, increasing the total cost and time needed for obtaining a home. Delays in turnaround times also cause the borrower to miss rate lock deadlines and possibly face penalties charged by the lender. NOTE: In a poll conducted by NAMB, 75.8% of respondents said that 0% of their appraisals are portable since the enactment of the HVCC.

2. Lack of Quality: AMCs are assigning appraisers from a different municipality, county, or even state to appraise the target house, therefore unfamiliar with the neighborhood and unable to produce an accurate appraisal. Because of this, the HVCC is forcing appraisers to be in direct violation of the Uniform Standards of Professional Appraisal Practice (USPAP) for jurisdictional competence. Because AMCs pay appraisers such low fees, those assigned appraisers willing to do the work are often inexperienced and fail to adequately appraise the home.

3. Increased Cost of Appraisals: The minimum increase we have seen in direct consumer cost is $150 per appraisal. That, coupled with the drastically increased appraisal turnaround times that impose extended lock periods at an average expense of $561.95 per loan, is now costing consumers an estimated additional $711.95 per transaction. Breakdown as follows:
$150.00 - minimum increase per appraisal

$561.95 - average loan amount of $224,778 at .25% for extended lock period

$711.95 - average total increase per transaction x 3,870,552* - 2007 HMDA report of residential real estate loans originated $2,755,639,496 = $2.8BILLION in increased fees to consumers!

Articles Illustrating the Effects of the HVCC

The Appraisal Bubble -

The Center for Public Integrity
The Cure is Worse than the Disease - Appraisal Press
Appraisals Roil Real Estate Deals - The Wall Street Journal

We need to take action and Stop This Nonsense! Right Now! Make your calls TODAY!

Track the bill: http://www.govtrack.us/congress/bill.xpd?bill=h111-3044

Foreclosure stats by state/ loan programs

2008-10-03T17:18:00.008-06:00

Foreclosure stats according to MBA:

Foreclosures in California and Florida increased (accounting for 39% of the total foreclosures started in the second quarter), offsetting the improvements in Texas, Massachusetts and Maryland.

There were 8 states that exceeded the national average: Nevada, Florida, California, Arizona, Michigan, Rhode Island, Indiana, and Ohio.

for the full story, click here: MBA

So, have we hit the bottom? Who knows? Just buy extra candy for the kiddies this year ...

Halloween is going to suck this year!

Please Leave a Comment!

2008-10-01T07:05:00.004-06:00

If you are visiting this site as a result of my request to help me try out a new webtracking tool, please "sign in" by adding a comment to this post so that I can track my results easier. Thanks for your participation!

September Recap

2008-09-30T21:27:00.003-06:00

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!

2008-09-30T16:46:00.002-06:00

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."

CHFA Money Continues!

2008-09-12T07:56:00.001-06:00

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...

FNMA & FHLMC under Conservatorship!

2008-09-09T07:06:00.001-06:00

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.

FNMA says TWO years after Short Sale?

2008-09-03T07:14:00.003-06:00

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

UPFRONT MIP EFFECTIVE OCTOBER 1st

2008-09-02T19:23:00.003-06:00

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!)

Recap for the month of:

2008-08-29T21:49:00.009-06:00

It's the end of the month ALREADY! Oh my!!

Here are the highlights of the posts done this month with easy access to find the info for reference in the future.

1st Time Homebuyer Credit

FHA Changes to Down Payment

Down Payment Assistance

Short Sale as Bad as Foreclosure

FHA Mortgage Insurance Premiums

ALSO - here is an important link when you want to be reminded of what the maximum loan amount is for an FHA loan is for a specific county: FHA MAX LOAN.

Next week I'll give you a preview of the upcoming FHA Mortgage Insurance Premiums... and more!

Short Sale Same as Foreclosure!!!

2008-08-28T06:02:00.006-06:00

Short Sales today seem to be all the buzz! While the pros and cons of a short sale can be bantered back and forth, there is one negative that isn't fully understood: many think that a short sale is saving their credit.

IT'S NOT!

When you a buyer does a short sale to assist them in the sell of their home, it will show up on their credit, even if the investor agrees to accept the balance as paid in full. When the seller of that home attempts to purchase their next home and completes the loan application form, there is a question "Have you ever had title or deed transferred in lieu of foreclosure". The correct answer would be "Yes". NOW is when there is the issue ...lenders DO view a short sale (or any mortgage 120 days or more past due, for that matter) the same as a foreclosure. Start the clock ticking, cause now we have to wait three or four years (depending on the loan program) to get them approved for the new loan.

Few sellers are actually told this!

However, it would seem that SOME sellers did understand this upfront. So, they acquired a new home before letting the existing home go into default or positioning themselves for a possible short sale. They "leased" out the current home so they weren't hit with two payments and could qualify for the loan on the new home. And when the "lease" would fall through, the seller would then quit making the monthly payment on the initial home not caring about the impact on their credit.

So now guess what? The guidelines have changed on accepting a lease agreement to offset the current mortgage payment.... and it's not pretty! We no longer can accept just a signed lease agreement, but we now also have to document the deposit AND the property must have 30% equity in the existing home!!! (This new rule does not apply to government loans.)
So I ask you, how many today have 30% equity in a home they are thinking about renting? But the better question is who with 30% equity would let it go into foreclosure?

Yikes!

Cast Your Vote on DPA!

2008-08-22T16:52:00.004-06:00

The elimination of Downpayment Assistance Programs with the signing of the Housing and Economic Recovery Act has created quite a stir in the industry. HR6694 is the bill that was introduced to the House trying to bring back DPA, the very next day after President Bush eliminated all seller assisted down payment assistance programs with the signing of HERA.

Do YOU have an opinion? Interested in what others think about it? Cast YOUR vote here:

WashingtonWatch

(If nothing else, you'll enjoy the comments others have made about the issue!)

1st Time Homebuyer Tax Credit

2008-08-21T18:29:00.004-06:00

Another interesting point worth discussing as a result of the signing of HERA is the tax credit offered to first time homebuyers (defined as not having owned a home in the past 3 years).

There is a lot of conversation going back and forth as to whether this is a good thing, or not a good thing. You be the judge. And to help you with that, check out this link from Realty Resource that gives charts and samples of the credit based on income and the repayment schedule:

Homebuyer Tax Credit

The dates to be eligible to apply for this credit are purchases from April 9, 2008 through July 1, 2009. This means YOU may have already qualified!

Housing and Economic Recovery Act of 2008

2008-08-20T19:05:00.006-06:00

It's no wonder there has been so little "official" release of the entire bill - it was 789 pages long!

So, I'm going to try and break this down into bite-sized tidbits as it affects our business daily.

The first BIG issue to prepare for is the increase of the minimum FHA down payment. As of October 1, 2008 the required down payment will go to 3.5%. (Previously the minimum investment was 3 per cent; 2.25% could be down payment and .75% in closing costs.)

This ties in directly with another big change regarding down payments: DOWN PAYMENT ASSISTANCE PROGRAMS. As of October 1, 2008 any seller assisted DPA program is no longer acceptable. The specific dates as it relates to DPA programs:

Loan must be final approved (including the FHA case number assignment) by September 30th.
The loan must CLOSE by October 31st.

(For more information on the actions taken since October 2007 with DPA, check out: http://activerain.com/blogsview/255218/Down-Payment-Assistant-Programs.)

This is not to be confused with most bond programs. In Colorado we are particulary fond of the CHFA's MRB First Step w/a CHFA 2nd program (http://www.chfainfo.com/). Even though the FHA down payment will be increased from a total of 3% to 3.5% of sales price, this CHFA program will stay at 3% (off total loan amount) at this time. HOWEVER, keep in mind that CHFA requires a minimum of $1,000 of the borrowers' own funds be invested in the property, it may not be a big change anyway (depending on whether the seller has agreed to pay all other closing costs and prepaids).

Stay tuned for more to come on HERA and the effect on our business day to day...