2013 Mortgage Thoughts

So as we all are back at "it" after the holidays now, I thought it an appropriate time to take a look at the mortgage market for 2013. Or at least how it see the year.

As the year wound down last month. It appeared the 2013 year would be a banner year for originations with government programs and ultra low rates spurring more home sales and continued refinancing activity. And I think that is still holding true with an additional few items that could tweak the outlook.

Most notabley, the Fed recently released commentary that some of the governors would like to see fed mortgage purchase volume slow down in the middle to year-end 2013. The 10 yr promptly shot up and mortgage rates spiked. However the move was muted due to the mortgage market absorbing some of the increased pricing by lowering margins. What this does tell us is that rates can move fast and as the government exits, the private party will need to become more involved.

The real issue is that if the private market has to return to the mortgage securities market, they will need higher yields undoutedly, and some clarity with mortgage rules and regulations. All of which seem to be very fluid issues with no clear resolution. The government still participates in 93-97% of residential mortgage originations. So it is clear if they exit, who will pick up the slack, or does mortgage volume plument, driving up costs and rates dramtically. It sounds dire but please take it from a seasoned veteran, rates can very easily rise to several points in a year.

My motto today, is a bird in the hand.  If you got em' lock em'. Which means of course, if you can see benefit from refinancing do it now, before its too late. No one can time a bottom.

If you see value in purchasing a new home, or an investment home. Do it. Rates and programs are very aggressive, and you may never see rates this low again.

New Underwater Mortgage Program HARP 3?

From Rob Chrisman's blog today....

"Not enough can be said about the importance of silence!" But there is no silence on rumors that the Treasury Department might try to push through a new initiative, referred to as the "Market Rate Modification Program," which will allow underwater borrowers with non-agency mortgages to refinance to today's low interest rates. That's right, anyone with an Alt-A, subprime, option ARM, jumbo, etc., should pay attention. As one lender wrote to me, "Katy bar the door!" This group has definitely been left out of all the fun, although the Treasury Department, and plenty of major servicers, has determined that borrowers with current LTV's north of 125% who have such loans are more likely to default, despite being current on payments. It is believed that what will be suggested is if a borrower is one of those "Significantly Underwater Borrowers" that is current on mortgage payments, they'll need to do is provide a hardship affidavit with the loan application which is meant to prove a "reasonably foreseeable default" under mortgage securitization rules. And this would supposedly satisfy investors who might otherwise prefer their higher original yield. Each month during the five years after the modification took place, the Treasury would pay loan servicers the difference in interest between the borrower's old rate and new. After the five years are up, the Treasury would stop compensating servicers, regardless of whether said loans were above water or not, and the borrower's interest rate would remain at the lower rate.

Posting live rates...

I think I'm tired of seeing low rate ads that never quote real scenarios. These are not automated junk, but real deals that I am quoting on a daily basis. I finally got tired of see Fixed Rate on TV @ 2.5% not telling you it's a 10 year fixed rate and the payment is based on $75000 loan amount. That's great for the one borrower is Fresno. But in California we need to see examples of real loan amounts and now you can see that at www.michaelfoote.com

Today's Rate Update

Mortgage Bonds are trading slightly higher today ahead of some big supply set to hit this week from the Treasury Department in the form of T Note offerings. 

In economic data, Durable orders were unchanged in October, while the case Shiller Home Price 20-city index rose to its 6th straight monthly gain.  

In addition, Lender Processing Services reported that home prices rose in September from the prior month and are higher from a year ago while Consumer Confidence jumped to its best level in more than four years. 

A Floating recommendation continues for it is tough to see home loan rates move significantly higher from current levels.

The Federal Reserve continues to keep home loan rates near record lows in an effort to shore up the housing market and that should continue well into 2013 or until such time that the sector can stand on its own two feet.

                                                                                                                                                                

 

MBS 16bps

Thanksgiving.

There are many things to be thankful for from the air we breath to the dirt we walk on and everything in between.

So please take time this week to be thankful for all the wonderful and glorious things we get to see and experience in our lives.

Happy Thanksgiving.

Purchase Sale and the mortgage process

OK you want to buy a house, now what? Buying a home is great and there are plenty of articles on the benefits etc. But let;s talk about just buying a home. More specifically, the financials associated with buying a home.

Can you afford it? The most basic qualifications allow you to finance and purchase a home with ratios as high as 45-50% of your gross income. Though most agree a number in the 33-38% range would be more preferred. So even today, we as lenders are able to offer a homebuyer good financing and allow for a reasonable amount of debt to income levels.

How much money do I need to bring in to close? Just because you are putting down 10% doesn't mean you won't bring in a amount at 10-15% of the sales price. In addition to the down payment most buyers will need to bring in interest and taxes for a prorated amount of time, you also may need to bring in closing costs for escrow, title, recording, notary, transfer tax, hoa fees, appraisal, tax service, etc etc. Many of these fees can be credited by the lender for an increased interest rate, or by way of seller or broker credits. These amounts and percentages may be capped on some mortgage programs.

How much documentation does it take. Pretty much everything over the last 90 days from bank statements to paycheck stubs, Your gonna need a ton of information, But if you are organized and retain your records as recommended you should be fine.

Get your trusted mortgage advisor involved before you start shopping. Get Pre-Approved by a lender like me to know EXACTLY what you are getting into.

180 days down just over 12 months ago...Approved

This business never ceases to amaze me. Today, I was able to get an approval for a client who was OVER 180 DAYS DOWN on their mortgage just last year. Their credit scores were over 700 already and they even had a few small paid collection accounts.

The moral of this post is; don't assume you are declined or can't get an approval until you have researched all the possibilities with a qualified licensed mortgage originator. You may be surprised by what you find out.

Post Election and Obama Mortgage Market Predictions

Ok.. finally it's over. All the ads, misrepresentations and taking everything out of context is over for a while - maybe.

Now we have to look at our businesses and determine where we think we are headed with current administration. This morning the market adjusted a fair amount and to the down side, with Treasury's rallying - resulting fantastic mortgage rates. It's a good day to lock, but where are we headed?

In my opinion, the Obama administration means we will see a longer period of low mortgage rates than we would have had with Romney. You will also see government maintain a greater share of mortgage lending backing. With recent announcements from Freddie Mac on earnings, its clear the government and the GSE's are enjoying making money again.

I think with the Obama admin you will also see a consistent barrage of new government intervention, compliance, audits, rules and regulations being continually beat with. Best case is we will continue to see consolidation in our industry as the purchase market continues its uptick and refinances continue to moderate after big rate drops.

The continued government involved will continue to limit private party money from entering the ring.
This will limit the pace of new mortgage products. Although a few may be able to navigate the government waters for reassurance that dipping their toes into the water won't get them bit off.

FHA vs Conventional? Is one really slower?

I had an interesting coversation with a client yesterday. The clients are making offers on properties and the listing agent made it clear that - FHA offers were not going to be accepted. It reminded me of a classic Blazing Saddles scene where everyone is accepted except for the Irish (rough language kids). Now at first glance this could be perceived as racist and I am sure some would make that arguement that it is. However, the truth is the uneducated Realtor makes that assumptions themselves.

The methaphor is clear, that there is a preconceived belief that FHA loans are harder and slower to close than a conventional loan. As an Origintor that does both, I can tell you that any loan can be difficult and it makes relatively no sense what product is necessarily chosen.

Of course there are exceptions, most notably condominiums. There are cases where a project is not HUD approved and as such cannot typically be financed with FHA funds.

But other than that, Realtor should educated themselves about the FHA process which is much more streamlined that in years past, and as a FHA approved lending institution, I have first hand knowledge that HUD or the local HOC's have little involvement in the FHA lending process once a lending institution is approved.

So stop limiting the real estate recovery and sell to FHA borrowers!

Support Small Business? History of Credit

You may not realize it but not only are you probably receiving poor service from your big bag of...I mean Big Bank, but you are also hurting small business (Big Bank Article). Smaller direct lenders and mortgage brokers can typically offer more attractice programs and pricing along with providing better overall service.

It sound strange to think a small company that may actually sell your loan to a big bank could offer terms better than that same big bank. But it's true. Smaller lenders and brokers have found ways to cut costs and create better operating efficiencies than their bigger counter-parts and in many cases pass those savings onto the consumer.

So next time you thing about a refinance - give the little guy a try!

Also, If you are interested in FICO scores... and how the hell they became so damn important - read this post.

Waiting Periods for Significant Credit Events

I received a good amount of positive feedback on my post regarding waiting periods after significant credit event such as BK, Foreclosure, Short Sales etc. So for those that missed it, please click the link and share with whomever you like. Please keep in mind many factors other than these affect the ability to receive an approval for a new home purchase and its best to consult a certified mortgage banker such as myself.

Waiting Periods for Significant Credit Events

From "the streets" not the "Street"

The mortgage business and the finance industry in general are still under attack. Because we didn’t self-police or use a moral compass (or even past historical performance) when considering the extension of credit and the creation of certain subprime and Alt “A” products years ago, we are paying the price as an industry today with over regulation and knee jerk proposals under the auspices of helping consumers who are ending up paying for it all, again.

This is no news flash. But many outside of the lending industry just don’t realize how much our government continues to try and over-correct the problems that created the crisis. These knee jerk decisions may in fact, further delay our economic recovery by further impairing the access to credit. Are we really to think the new GFE did anything to improve the consumer experience or help clarify terms? The lending climate is so frightening, that many believe it’s the reason why private equity hasn’t entered the RMBS arena in any large way since the collapse. These investors just don’t know where we are headed with government intervention and frankly yields are higher and the risks lower in other non-mortgage investments.

The changes being proposed by the CFPB do not serve to protect consumers or clarify terms and conditions of mortgage. In fact, I would argue many of the CFPB proposals will in fact, increase costs and fees, further confuse both consumers and the lending industry, and force further consolidation in a business and employment pool that has already been decimated. Just look at turn times. And do I really need to comment on the Appraisal AMC’s and appraisal costs doubling? We can’t even keep up at most lenders. It’s a fact that mortgages and costs associated with mortgages are already an all-time low – wasn’t that the goal?

Business owners and those tasked with managing a mortgage company’s compliance and policies and procedures don’t like the government changing the rules in the industry without a really good reason and certainly not without reasonable forethought and planning.

Such is the case in mortgage lending. In just a few years, we’ve created a brand new government agency, the CFPB, to protect the consumer. While I applaud and support any efforts that REALLY help consumers, forming an agency with NO ONE from the industries they regulate on their staff seems utterly ridiculous. Just a couple of “mortgage” people could have squashed the whole flat fee proposal quickly, and avoided further stressing an already “scared to death” lending industry and environment. I know that having an agency stacked with all finance people would be counter-productive.  But, it’s akin to a “mortgage” person, telling the nuclear industry how to dispose of nuclear waste and spent fuel rods.

Most should agree that consumers need to be protected. But some of the ideas the CFPB are offering appear to be totally irrational and not thought through nearly enough prior to announcement. Let just talk about two issues—1) Loan Originator compensation/requirement to offer no points and no fee mortgages, and 2) the SAFE Act and Loan Originator licensing.

So let’s talk about LO comp. Just this week the proposal of flat-fee compensation was dropped.  Here is a fine example of a government body presenting an idea that doesn’t even sound good in theory.  Immediately everyone in our business realized this would do nothing but further raise prices or downright eliminate the access of credit to the most underserved part of our population-- the low income homeowner/homebuyer with small loan amounts and/or sales prices. This proposal created months of debate and responses to the CFPB which undoubtedly were probably something like, “Are you guy’s nuts!”  The lowly LO already gets paid on basis points based on loan amounts, which is basically flat. Did they really think a borrower with $50,000 balance would be treated or serviced like a borrower with a $500,000 balance? If anything, we need variable comp to support those borrowers.

Most of us on the “street” already offer no points and no fees structures regularly. There is no advantage for me to offer a loan with discount points or without, or for offering a FHA loan versus Conventional. Yes, I know some pay varying comp on those products still. And I assume they will correct that once their company’s CFPB audit is complete. When I quote from our rates sheets, I am quoting with loan officer compensation already built in.  And what about payday loans…You mean to tell me my 3.25% fixed rate APR is a serious problem, and a 199.99% APR from a payday lender is fine?

We are already offering loans with APRs the same as the start rate. When I examine no points and no fees, the only purpose is to analyze the financial benefit and recoup period compared to the buyer/borrowers goals with the subject property-both short and long term, not because I make more on the loan. So why regulate and create new policy for something that is already in place?

Now let’s talk about the SAFE ACT and the creation of the NMLS?  Yes, I know the CFPB did not create the SAFE ACT or the NMLS, but they are certainly involved in the administration and oversight as the be-all-end-all financial oversight agency. I think we must have 5 regulatory agencies involved to some degree now…But I’ve lost count.

Prior to Dodd Frank and the SAFE ACT, we already had state licensing agencies, educational requirements, testing, finger printing, background checks etc. So let’s go ahead and add another federal layer to the mix. I agree that bank LO’s should be licensed the same as non- depository lenders, that hasn’t even happened yet. I’ve been fingerprinted over 20 times in the last several years – does that seem reasonable or provide any kind of protection for consumers?

How about a state agency like the CA Department of Corporations that needs to approve the “transfer of existing active approved licenses from one approved NMLS company to another NMLS approved company”?

During a change in my employment recently, I needed to wait over two weeks to receive approval from the CA DOC that already knew I was approved, active, and working. The DOC prevented me from originating new mortgages in my name, which is required to be paid for originating a mortgage. According to the NMLS, “the state CAN approve the transfer the same day”? I suppose that is possible, but states are broke and most state agencies have seen massive cut backs and furlough days. So a same day approval may turn out to be longer than many hope for. Either way, I as the dastardly LO, have to pay the price and cannot earn a living until my license receives the “rubber stamp” blessing. Many companies have resorted to boarding loans in other licensed originators names and then either transferring or paying those LO’s once the loan is funded. And from everything I’ve read, you can’t do that either.

Finally, I am not saying the government shouldn’t try to protect us. I don’t think banks should charge $5 a month for an ATM card, or charge $3 when I need a $100 from my checking account when there isn’t a branch of my bank nearby, or charge $35 late fee on a credit card with a $100 balance.  But then again, I don’t run their businesses which were formed to make a profit. And I guess that is my real point, free trade makes markets, not government agencies.  If I don’t like those fees, I can take my business elsewhere.

 I will leave the CFPB with a few easy fixes that would actually help consumers.

1.       If a borrower pays for an appraisal, it should be transferrable--no questions asked. We have “awesome” AMC’s, who now charge a premium above appraisal costs, and since there is no longer collusion between LO’s and Appraisers, that would actually provide the opportunity for consumers to take their business and paid for appraisals elsewhere if needed. I just had an appraisal for a $150,000 investment property cost $625.00 - utterly ridiculous.

2.       Put a signature line on the GFE. The amount of incorrect GFE’s out there is probably pretty frightening – and I hope wholesalers out there take note from this Stearns audit.  

3.       Use the APR as it is intended. The APR is a mandated disclosure under Truth in Lending. Mortgage shoppers confront it as soon as they search for interest rate quotes, because the law requires that any rate quote must also show the APR. With further consumer education on the APR, consumers should be able to easily shop for the best mortgage offer.

Mortgage Credit Tight?

Watching CNBC today and it amazes me that the press is talking about tight mortgage credit.
OK if you compare credit guidelines today versus 2005-2006 yes, it's tighter.

If you write off all your income and try to hide from the tax man, access to credit is limited. But you and I both know if you aren't paying ALL your taxes, you don't deserve the lowest rates available.
Those rates are always going to be for those who can document their income.

But the fact is Roughly 69% of American homeowners with mortgages at the end of the second quarter had rates of 5% or higher and about 33% of them had rates above 6%, according to detailed mortgage data provided to The Times by Santa Ana research firm CoreLogic."

So why haven't these people refinanced? Most likely, valuation, credit score or credit issues, or, and I hear this a lot. They want to wait for lower rates! Really? With the G- Fee increase and QEIII coming to fruition, don't bet on it. The banks and large lenders are just going to take the increased profits.

In 24 years I've never seen rates this low, and that's becuase they've never been this low.

So if you haven't looked at refinancing, take a look today, even if you refinanced over the last 18 months.

Shocked

I had a meeting today with my financial advisor. I needed to get some things in order for my family and my retirement. Anyway, while I'm in the meeting my advisor's boss asks me what's new in lending, you know products, rates, etc. I tell him business is good, rates are ridiculous, and the HARP program has really helped keep lending going.

Like it or not, the government intervention has keep the real estate market from completely imploding (Yes, it could have been worse). The low rates provided by our Fed along with the HARP program have really helped millions of families lower their housing costs.

He asked? "What's HARP" After being surprised that a senior financial advisor doesn't know, I realized that with all the marketing out there, many still have not heard about this program.

So here are the basics. HARP II allows for underwater homeowners to take advantage of today's low rates by providing the liquidity in today's residential mortgage market for lenders to fund these types of transactions. This program is for not only for primary residences, but second homes and investment properties qualify too.

In some cases the program HARP II will allow unlimited loan to value. And what does loan to value mean? Well if your home is worth $300,000 and you owe $600,000 your loan to value is 200%. If you home is worth 100,000 and you owe $80,000 your loan to value is 80%. Pretty simple right?

With HARP, homeowners that are underwater AND want to hold onto their properties have the opportunity to lower their overall mortgage payments on these properties. This helps keep homes out of foreclosure and ultimately keeps property values higher as reduced inventory creates limited options to today's home buyers who have begun bidding up properties in many areas.

You need to make sure your mortgage is owned by Fannie Mae or Freddie Mac and needs to have been funded prior to June 2009. But these rules may change soon too.

Although we are not out of the woods. A recent study shows 50% of Nevada homeowners are still underwater. But the private market has begun to come back into lending with unique programs for self-employed borrowers and borrowers with less than perfect credit or who may not be able to show as much income as needed on their tax returns.

The bottom line, it makes sense to talk with your mortgage advisor (like me www.michaelfoote.com) about ALL the options that are available for you and what is best for your short and long term homeownership goals.

So give me a call or email me today.

What a Loan Officer shouldn't tell you...

I had an interesting call from a client. I lost the loan to another loan officer because Bait and Switch is still alive and well. It is always my policy to "l.eave the door" open. I figure if I lost your loan to a competitor, its my fault, not yours. Anyway, I followed up with the client to see how they were doing and sure enough the loan officer changes the story AFTER the appraisal fee was paid. So I quoted the rate and cost again and told him the rates would probably settle down. Of course, the other lender told the client that they HAD TO LOCK today since the appraisal was done. I told the client if he came with me I would pay his appraisal fee and he ASSURED me he was going with me and he was only talking with myself and the other company but since they tried to raise the rate on him, he was going with me. Great! And off we go.

We get all the disclosures done and we are ready to order the appraisal and the client writes me back saying he was going with his old mortgage guy from 10 years ago. What probably happened was he went back to the other lender since rates settled down and they were probably able to get close to the original quote.

The moral to my story is this, mortgage people AS WELL AS BORROWERS are capable of lying and being deceitful. So when you ask why all these fees or the higher rate, its becuase the consumer has been trained to not trust anyone when dealing with mortgages or any other financial products and because there is little loyalaty between mortgage companies and consumers fall-out if higher and therefore costs per closed loan are higher. 

This particular borrower, had he gone with me, would have saved even more money since the market continue to move to the better after he went to the first person that had lied to him- undoubtedly he was in a rush to close (which never makes sense) unless you are a purchase transaction.
This deal isn't funded yet....so let's see if the story changes again.

So save yourself the grief and trust your mortgage advisor.