Frequently I run into many of you that read this column, and I am asked if I am the one that writes it. The answer is YES! I do not cut and paste from any other source. I do my own research, and expose my own thoughts. Which by the way, to clarify, are not the thoughts of Patriot Bank Mortgage. Read at your own risk. Why does my opinion matter? It does not. But my goal each week is to provoke thought, and through that, understanding. I hope that by sticking together, and providing you , the real estate professional (most of my readers), insight that you can trickle into the community.
So you know what is coming next........my experience, and my insight. Emotioanl response (by the way) is EXACTLY how our economy is affected every single day. The 'emotions' of individuals and companies, and their buying behavior as the buy and sell stocks. Have you really sat down to think how much we rely on the stock market to identify our lives? Our well being? It is astounding. The S&P 500 has the most psychological power over people that I have ever seen. That and the news media. Which is another story. Don't get me started.
It is time to 'step up to the plate', fellow Houstonians. If we do not start believing in our economy, and start buying, we are succumbing to the hoopla of this whole entire mess we are in. Is there risk I could lose my job? Of course, always has been, and always will be. If I am living in my means, if I save, hopefully I will get through tough times. For those of us that are suffering, or facing foreclosure, I am truly saddened, and hope things go your way. But for those of us that are not, it is our RESPONSIBILITY to keep the economy going.
Interest Rates are LOW LOW LOW. There will never be a better time. If you sell low, chances are you will buy low too! So move past it! Are we all relying on values that maybe were never there anyway? Apolologies for upsetting anyone, but the market value of our homes is what buyers are willing to pay. And in today's market, it is maybe a little less than 1.5 years ago. But maybe it is time to upgrade to the house I have always wanted that is now priced where I can afford it! We have seen ups, and we have seen downs. Neither of these cycles will last forever.
Now some facts:
Rates are at record lows- 4.5%-4.75% on a good day (with a point, and excellent credit and 20% down!)Loan availability is shrinking due to credit scores: Get qualified early, and with a mortgage lender that can guide you on how to improve those scores before buying (like me for instance!). Let me elaborate on this by saying that if you do not have a 720, you will not get the best rate, and further more, if you do not have a 680, probably no loan at all unless you put 20% down. The credit scoring system is unfair and imperfect (regarding how it treats collections, for example), but it is what we have to deal with. So understanding is the key.
Appraisal changes are about to rock our worlds: As of May 1, mortgage companies have to outsource (if you are a broker) and centralize (if you are a direct lender, like us) the ordering of appraisals. The loan officer can not 'choose' its favorite appraiser anymore that will 'make value'. You very well may have a listing that has an appraiser that does not frequent the area. Sorry, its is the way it is going to be. Fannie Mae (and HUD) has determined that direct loan officer involvement has contributed to the over inflated values, and must be removed from the process.
There will be more mortgage company failures: with the shrinking of credit (for lenders) and increased foreclosures for lenders , there will be more consolidation. Example: CNN MONEY reported this morning that Thornburg Mortgage (THE TOP JUMBO LENDER) is about to file Chapter 11. Like Jumbo's needed more negative news. They already are at record highs (for the last 6 years). But for a million dollar mortgage, fixed for 30 years , for slightly under 7%, come on, are we that spoiled that we don't remember double digit interest rates? The trouble is , no, most buyers these days are too young to remember.
We will survive this! Its just another cycle.
Friday, March 27, 2009
Saturday, March 14, 2009
Tips to Survive the Mortgage Approval Process
As of March 9, there are more restrictions being passed down from the powers that be (who are they anyway? ). Mostly having to do with condo's , and PMI. This week I actually had 2 actual clients affected mid process. They were approved, and then sort of , and then not...as we needed more 'stuff' after these new rules were released. This kind thing does not happen to me! Well, I almost truly cratered this time. Delayed closings, sellers and buyers affected. I was face to face with a seller that let me have it for not providing the funding number that afternoon (the FIRST time that I can remember in 3 years). We fund on time ! Not that day. The stress is unimaginable. But we are got through it, and that is the important thing.
As for the cumulative changes affecting our industry as of date, here is a summary:
CONDO's:
LOTS of more questions to ask. We used to get by with 'limited reviews' (kind of like a stated income for condo projects! ). Well , no more. We have to ask the HOA questions like: 'How much fidelity bond insurance do you have? ' , ' Are more than 15% of the homeowners delinquent on HOA dues?', 'In event of foreclosure, confirm we do not have to notify the HOA we are doing so...' Are blanket mortgages allowed?' .... WHAT!!!!!!!!!!???? All this detail makes your head spin. But there is a reason to this madness, believe it or not. Condo's attract investors, and they also attract fraud. There are entire buildings in Houston that have foreclosed from fraud schemes. So any triggers that pre empts a red flag is being asked. Also, when large percentages of condos in a project are suffering from foreclosures, units become in disrepair, the HOA does not have money to function, and deferred maintenance occurs. My Advice: be sure your lender has access to the HOA EARLY!
Mortgage Insurance-
out of 6 companies total in the US that offer PMI: Only 1 will allow a 5% down condo purchase. Otherwise, 10% down is the minimumThree companies require a 680 minimum credit score - the trend here is that no one with <680 will be able to have PMI. Many of the 2nd lien lenders are 680 too. So where do they go???? They put 20% down (this is a forecast, not fact yet)Two companies allow Second homes investors are not eligible for PMI - so 20% down minimumFive companies require maximum debt to income ratio of 45% (even if Fannie Mae allows to 55%- they don’t care!)**One of the PMI companies is owned by AIG- HINT, that is where your tax money is going, to keep them in business, and help homeowners! So that is why we should be in favor of some big business bailouts (some of them) Mortgage Insurance Companies are losing billions of dollars. The way it works is that (for example) on a 5% down loan, the MI company insures the lender 30% of the loan in case of default. So if a $100,000 mortgage goes into foreclosure, they pay a premium of $30,000. With foreclosures at current levels, the loss is absolutely huge.
CREDIT:
Any open accounts in dispute must be resolved or removed - this could take up to 30 days with the bureaus! We need to see your clients’ credit to prequalify early!!!!!!!!!!!!!!!!FHA new minimum score is 620- all lenders have adopted this.Credit scores <720 have severe hits to the interest rate. 740 is the new 'best score for pricing'Remember- it only takes ONE collection for $5 to bring your score down 70-100 points. No kidding. Get those clients with a lender 3-6 months in advance...so we have time to correct issues.
How do we survive this chaos? Put your two feet on the ground, smile, and get through each day with a positive attitude, and last but not least, refer Jennifer Hernandez to your clients in need of mortgage financing.
As for the cumulative changes affecting our industry as of date, here is a summary:
CONDO's:
LOTS of more questions to ask. We used to get by with 'limited reviews' (kind of like a stated income for condo projects! ). Well , no more. We have to ask the HOA questions like: 'How much fidelity bond insurance do you have? ' , ' Are more than 15% of the homeowners delinquent on HOA dues?', 'In event of foreclosure, confirm we do not have to notify the HOA we are doing so...' Are blanket mortgages allowed?' .... WHAT!!!!!!!!!!???? All this detail makes your head spin. But there is a reason to this madness, believe it or not. Condo's attract investors, and they also attract fraud. There are entire buildings in Houston that have foreclosed from fraud schemes. So any triggers that pre empts a red flag is being asked. Also, when large percentages of condos in a project are suffering from foreclosures, units become in disrepair, the HOA does not have money to function, and deferred maintenance occurs. My Advice: be sure your lender has access to the HOA EARLY!
Mortgage Insurance-
out of 6 companies total in the US that offer PMI: Only 1 will allow a 5% down condo purchase. Otherwise, 10% down is the minimumThree companies require a 680 minimum credit score - the trend here is that no one with <680 will be able to have PMI. Many of the 2nd lien lenders are 680 too. So where do they go???? They put 20% down (this is a forecast, not fact yet)Two companies allow Second homes investors are not eligible for PMI - so 20% down minimumFive companies require maximum debt to income ratio of 45% (even if Fannie Mae allows to 55%- they don’t care!)**One of the PMI companies is owned by AIG- HINT, that is where your tax money is going, to keep them in business, and help homeowners! So that is why we should be in favor of some big business bailouts (some of them) Mortgage Insurance Companies are losing billions of dollars. The way it works is that (for example) on a 5% down loan, the MI company insures the lender 30% of the loan in case of default. So if a $100,000 mortgage goes into foreclosure, they pay a premium of $30,000. With foreclosures at current levels, the loss is absolutely huge.
CREDIT:
Any open accounts in dispute must be resolved or removed - this could take up to 30 days with the bureaus! We need to see your clients’ credit to prequalify early!!!!!!!!!!!!!!!!FHA new minimum score is 620- all lenders have adopted this.Credit scores <720 have severe hits to the interest rate. 740 is the new 'best score for pricing'Remember- it only takes ONE collection for $5 to bring your score down 70-100 points. No kidding. Get those clients with a lender 3-6 months in advance...so we have time to correct issues.
How do we survive this chaos? Put your two feet on the ground, smile, and get through each day with a positive attitude, and last but not least, refer Jennifer Hernandez to your clients in need of mortgage financing.
Saturday, March 7, 2009
Smart Buyers are buying now!
Our phones have been ringing nonstop today after the unemployment numbers released worse than expected. Rates normally would go down. But not today. They went up a small bit, as the treasury prices are being pushed down with flooded demand (rates move the opposite…so up).
National employment is at 8.1% , the highest level since 1983. Let’s look at the bright side, it has not yet reached the worst in history, which was 10.8% in 1982. I don’t mean to make light of a grim situation, but they say psychology is everything. If you tell yourself it is a bad time, it will be. If you tell yourself it is a great time, it will be. Which is it for you? I say it’s a great time. A great time to be a Houstonian/Texan for sure. We are (finally!) getting the recognition we deserve as having (a) lower unemployment (b) more affordable housing (c) less foreclosures, and (d) having a positive jobs market. And did I mention we only have 6.5 months of housing inventory? Its a far cry from Florida with 28 months. I just cannot even imagine what that would be like. Again, thankful to be a Houstonian.
Is Houston experiencing lower pricing and sale levels? Yes, we are. No one is recession proof. Oh wait……Fargo, ND has 3% unemployment, and according to CNN is not in a recession. That’s right. Let’s pick up and move there! (No offense if you are from Fargo). I’m a city girl. We live in the 4th largest city in the US (#1 if you are talking land size) with lots of people. And that means that we are impacted more by trends. Also, we have to keep in check that the last few years we enjoyed above average returns in real estate. Incredible numbers! What we are seeing now is more ‘normalcy’. That statement is from Mike Inselmann himself , the President of Metro Study.
SMART BUYERS are buying now with these low rates! With unemployment numbers on the rise, and the recession with no end in sight, will we have a repeat of the 80’s and 17% interest rates? My generation (I was born in the 70’s ) is too young to remember these times. But I have been told that history is starting to repeat itself. So will Obama’s policy making make Jimmy Carter look like a saint? My point here is: get out there and buy while you can, before the rates spiral out of control. You could be one of the lucky few someday with a single digit rate- and in the 4’s at that!
National employment is at 8.1% , the highest level since 1983. Let’s look at the bright side, it has not yet reached the worst in history, which was 10.8% in 1982. I don’t mean to make light of a grim situation, but they say psychology is everything. If you tell yourself it is a bad time, it will be. If you tell yourself it is a great time, it will be. Which is it for you? I say it’s a great time. A great time to be a Houstonian/Texan for sure. We are (finally!) getting the recognition we deserve as having (a) lower unemployment (b) more affordable housing (c) less foreclosures, and (d) having a positive jobs market. And did I mention we only have 6.5 months of housing inventory? Its a far cry from Florida with 28 months. I just cannot even imagine what that would be like. Again, thankful to be a Houstonian.
Is Houston experiencing lower pricing and sale levels? Yes, we are. No one is recession proof. Oh wait……Fargo, ND has 3% unemployment, and according to CNN is not in a recession. That’s right. Let’s pick up and move there! (No offense if you are from Fargo). I’m a city girl. We live in the 4th largest city in the US (#1 if you are talking land size) with lots of people. And that means that we are impacted more by trends. Also, we have to keep in check that the last few years we enjoyed above average returns in real estate. Incredible numbers! What we are seeing now is more ‘normalcy’. That statement is from Mike Inselmann himself , the President of Metro Study.
SMART BUYERS are buying now with these low rates! With unemployment numbers on the rise, and the recession with no end in sight, will we have a repeat of the 80’s and 17% interest rates? My generation (I was born in the 70’s ) is too young to remember these times. But I have been told that history is starting to repeat itself. So will Obama’s policy making make Jimmy Carter look like a saint? My point here is: get out there and buy while you can, before the rates spiral out of control. You could be one of the lucky few someday with a single digit rate- and in the 4’s at that!
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