Welcoming Pablo!

This weeks message will not contain market information nor rates, but purely a letter from the heart. I am feeling a bit sentimental......................

Pablo Fernando Hernandez was born yesterday at 3:30 PM, weighing 9 pounds 2 ounces and 21 inches long. Up until that moment he arrived, my biggest fear was wondering if I had the capacity to love another human being as much as my 1st son, Diego. Now, I know that indeed I can.

At the birth of a child we are overwhelmed with the feelings of innocence, promise and hope. I once again have asked myself, what is my purpose in life? Several weeks ago, I answered that very question, as my business coach had instructed. I came up with (1) For my family to have enough, and not need or want for anything , (2) Impact the lives of people I love whether it be emotionally or financially when in need, and (3) make a difference in the community, family/friends, and professionally with clients and coworkers. Well Josh, since I know you are reading this, I have now added a fourth one, and perhaps if in order, the very first. My purpose is for moments like the one I am feeling today. To be completely free from worry or despair, and the feeling of immense elated emotion and peace.

Friends, take a moment, as a favor to me, and reflect upon those moments of happiness that have shaped your life. I hope that they are many, and many more to come. May we seize each moment as if it were our last, and leave an impressive impact on those lives we touch every single day.

Keeping up with the Jonses

As I see Realtors throughout the week, it is alarming at some of the stories 'other' lenders are telling the real estate community! It is amazing how a story or new regulation can have so many different interpretations! Let's answer some questions that I received this week, and you can have one lender's view (Patriot Bank Mortgage - who should be on your referral list, by the way). Remember, we are your friend in lending, and we endeavor to keep ourselves up to date on industry standards and interpretations so we can help you sell more real estate!

This may be long, so pick and choose what you want to absorb. I hope it’s informative.

Why do different lenders have different rules? Excellent question! Fannie Mae/Freddie Mac publishes guidelines, and the investors (ex: Wells, BA, GMAC, etc....) interpret them. They put overlays, and give us, the lenders who originate the loans, their guidelines for purchase of the loan. So, depending on the investor we use, and the borrowers’ qualifications, that drives what 'rules' we are using. Sometimes we have to use a different investor (ex: Wells over BA) because of an appraisal issue or income document. It gets very hairy and complicated at this point. The bottom line is, IT IS DIFFICULT, and the underwriters have to decide how much risk we can take to bend the interpretations, so we can have a sellable loan!

My listing didn't close because the underwriter said the house had been on the market too many days. Can lenders do that? This is a very complicated question, and has many answers. But first, know that investors are looking for ANY reason not to buy loans, and the easiest thing they can pick on is the appraisal. It is the only document left still up to interpretation. Income and asset docs are cut and dry, black and white. But the appraisal......that can form an entire life of its own. So that is where lenders are cracking down the most and taking the most conservative approach. DOM (days on the market) is a HUGE red flag. An underwriter’s questions would be: (a) Why would anyone list a home not priced to sell? (b) What is wrong with the property that caused it to be on the market so long? (c) What do the other comps look like, and how many DOM were they? So there is not an easy answer to this realtor's question. We would have to dig a lot deeper, but as a listing agent, if you have a property that is over 180 days on the market, be prepared to defend your sellers. Saying that they were not in a hurry to sell is not going to do the trick.

I heard a lender say that now they (lenders) are checking credit the day of closing, and last minute a borrower may not qualify!!!! Yes and No. Fannie Mae/Freddie Mac have published guidelines that say the lender must verify that up until the DAY of closing, the borrower has no new debts, and that the loan application is completely accurate. So, lenders have interpreted that as: we have to check credit before closing, to be sure no new debts or inquiries into the credit report. Every lender has their own interpretation of this. By the way, a new credit score is NOT required. Some lenders will take this to the extreme, and verify credit the day of, and maybe even pull new credit scores. This is a nightmare waiting to happen.

AT PATRIOT, we will refresh debts and inquiries (only- no new score) 5 days prior to closing. This will allow us enough time to cure any questions with the borrower. Also, we are mandating a disclosure at application, advising the borrower what NOT to do with their credit. No inquiries, no new credit (wait to buy appliances!), no new anything. Don’t even charge on your current cards. If you do, your loan can and will be affected. Hopefully this will work. As you probably know, some borrowers don't listen. But we hope the signed disclosure in big font will get their attention. Lastly and most importantly, ask the borrower’s lender what their policy is on this topic, so you are prepared. How many days before closing will they refresh the credit?

Our sales manager told us today that appraisers now have to be knowledgeable in the area of the appraisal - yea! In theory, YES! Fannie Mae just released selling guide updates (https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2010/sel1009.pdf) that become effective Sept. 1. They clarify that (a) neither the HVCC nor Fannie requires lenders to use third party vendors to choose appraisal (hence: appraisal management companies), and (b) appraisers who lack requisite knowledge, experience, and access to appropriate data must not be utilized, and (c) It is incorrect for an appraiser to indicate that the HVCC does not allow for communication between the lender or an authorized representative. This is important, so let’s break it apart:

(a) Neither the HVCC nor Fannie requires lenders to use third party vendors to choose appraisal (hence: appraisal management companies) - this will still happen with the larger national lenders. So beware. Once you know who the lender is, call and ASK them how they handle appraisals. Many times, if an AMC is used, it means longer turn times, and the possibility of getting an unknown appraiser is greater. They usually use a 50 mile radius when choosing appraisers, AND use companies that will do an appraisal for 1/2 the fee, so they can keep the other 1/2. Think about it. At Patriot. we use a small list, of trusted appraisers that we know are familiar with the area. If we have a loan south, like Clear Lake or Galveston, we use our Clear Lake branch list to choose the appraisal.

(b) Appraisers who lack requisite knowledge, experience, and access to appropriate data must not be utilized – Ok, in theory, that is how it is supposed to be now. Fannie Mae saying this changes nothing. How will this be policed? After the appraisal is done, and the underwriter or realtor complain it is a bad appraisal? What we see is happening now, is that it will be controlled on the investor level. The large investors we sell to (ex: Wells, BA, Citi, etc…) each now update their ‘blacklist’ of appraisers on a DAILY basis. That means that before we close a loan, we have to make sure the appraiser is not on it. In the QC process, after the loan is purchased, they will flag an appraisal/appraiser they think is bad, and then update their list as to not accept that appraiser in the future. This is a tedious process! But we are handling it. My main point here is not to get too excited. In fact, it may delay the process more if an appraisal is ordered, and completed, then days before closing the lender tells you, oh by the way, we have to do another appraisal, because they are on the investors black list. This is my premonition. You heard it from me first!

(c) It is incorrect for an appraiser to indicate that the HVCC does not allow for communication between the lender or an authorized representative – I have heard many realtors say that an appraiser will not talk to them, saying it’s against HVCC. FALSE! Don’t let an appraiser get away with this! Stand your ground, meet them at the house for the appraisal, with comps in hand. They don’t have to use them, but at least you have done your part. Try and try again.

Ok, that’s enough for today. If you are like me, you’re fogged by now with all this info! Have a great weekend, stay cool, and remember to refer us your next client! Kenny, Sarah and I would love to hear from you! (That is my team- they are awesome!) You can reach us at the numbers below.

A rainy economy means amazing rates

On this much deserved long weekend, we at Patriot hope you enjoyed a safe and restful holiday. For me, the rain was a good thing, giving me further excuse (other than 38 weeks pregnant) to sit on my sofa watching Criminal Minds reruns, or to play super heroes with my son. His favorite phrase now is ‘ I know Mommy, you can’t sit on the floor, baby in your tummy’. So we play from my permanent spot on the couch! He does the moving around of the figurines, bolting around the living room catching the bad guys. It is so entertaining!

Lots of news this week, including rates down since Monday! Enjoy!

RATES: This week mortgage bonds had a party with all the sour news around the globe. With strikes in Greece and Spain, and concern over the European Bank’s Thursday deadline to repay the European Central Banks over 442 Euro ($539B USD), the stock market took a nosedive, and that was great for bonds! Remember the inverse relationship. Bad news in the economy, good news in the bond market, hence lower yields (rates). Enjoy it while it lasts. Or will it continue? I thought for sure rates would be almost 6.0% by now. If your buyers are sitting on the fence or unsure, NOW IS A GREAT TIME! Rates are about .50% lower than a month ago. A .50% reduction in rate on a $200,000 loan translates to $60/month! That is a facial in my playbook. I’ll take it.

JOBS REPORT – released this morning, the results were better than expected, but still bad. Translation: Economy still weak, many still unemployed, so stocks remain low. We need some good news people!

HOUSE REFORM BILL: Passed. A load of financial reform for banks, lenders, financial institutions. Loaded with compliance (translation: costs) which will increase the cost of doing business. But nowhere in the reform bill was anything that applies to the ratings institutions that rated all the mortgage bonds AAA to begin with. Isnt that what got us in this mess? Investors bought the mortgage backed securities, because the ratings agencies graded them as AAA. They relied on the information . How come they are not regulated? Hmmmm…………to view a summary of what’s in the bill go to http://money.cnn.com/2010/06/25/news/economy/whats_in_the_reform_bill/index.htm?postversion=2010063018

HOMEBUYER CREDIT EXTENSION: has passed both the Senate and the House, and just needs sign off from Obama. As of right now, I can find no research saying he has signed off. Expect after the holiday. It would extend the deadline (for those already under contract by April 30) to September 30.

FLOOD INSURANCE : As anticipated, the National Flood Insurance Program (NFIP) funding has once again been extended until September 30, 2010 in the latest extension granted by Congress until they can consider more meaningful changes to the Federal flood insurance program.