Beumont Appraiser to Valuate a River Oaks Listing

This is Major Hernandez, reporting from the enemy lines. Lots of activity this week. We were shot at by underwriters, dodged by appraisers, and yelled at by our processors. JUST KIDDING. It is sometimes a war zone though! Mostly from some of the recent regulation passed down (my previous emails have mentioned the appraisal changes). I thought this week I would summarize for you the day in the life of a mortgage originator. Maybe there will be one tidbit of information you can use to help your clients close on time!

Here is a summary of what happened this week:·
Clients current lender (the FDIC) offered a 15% principal reduction if he would refinance within 30 days !·

Rumored by one of my competitors that underwriters no longer accept a non realty add – THIS IS WRONG……·

Mortgage Lender (remaining nameless) is turning away clients saying 90 days min processing time to close – actually 2 (hint: they are in the top 5 national lenders)·

Seller rejects pre approval letter from buyers mortgage company because fear they will not close on time (one of the national lenders mentioned above)·

Realtor I know gets a call from an appraiser (not mine!) from Tyler , TX (this is a true story)·
Prospect calls me and asks if we do liar loans- IS HE KIDDING?·

At closing, we discover that borrower quit his job (we always call the day of closing to the employer!!!) HINT: don’t quit job day of closing·

We saved 2 borrowers from losing their close dates- and closed their loan in 7 days! (the first lender dropped the ball for the last 6 weeks). Hard to do in this market!

Well, at least I can say my job is interesting. Actually, I love every minute of it! So please, if you have a client that needs a trusted mortgage lender, we are your answer. Thank you for your referrals!

There is a Rumor that the Mortgage Appraisal Process is Deteriorating

Just great. As I write this, I have full blown laryngitis and bronchitis pending if I don’t behave. So if I seem chatty, it’s because I am just longing to speak to someone. Why did this happen to me? Is it because I only sleep 5 hours a night after being on the computer sending pre approval letters? Probably. Or that I am closing 4 times the loans this month than normal? Probably. I am just venting, not looking for sympathy, but want you to comprehend that it is busy! I don’t care what Barton Smith says. Houston is rockin. Whether you are purchasing or refinancing, it is money in the economy. People buy, they go to Target and Home Depot. They refinance, they save money, and have more spendable dollars in their pocket. Heck, I a have 2 new employees starting Monday to support me, and is that not keeping the economy going? So Barton….whatever. We survived Alison, Enron, and Ike, and we will survive this!

Right now, today, rates are increasing because investors are feeling a sense comfort that some bank stress tests will be favorable. They are so fickle. Then tomorrow, for jobs report, if it is less than stellar, rates will go down again. So why is it that negative news keeps the rates so low? Chrysler not paying back the bailout money, a major bank in Atlanta failing, the Swine FLU (rates dropped big after that was released!). The worse the news, the better the rates. Why is that? Because bad news makes investors feel skiddish about the stock market. THey feel unsafe. So they take their money, and dump it into the bond market to seek safe returns for a while. This increased demand pushes up the bond prices, and the yields push down in response (always inversely related to the price).

Changing the subject, I had a realtor ask me a few days ago if rates were going down after the Fed just announced a .75% rate cut. How can that be? The fed funds rate is already .25%. It would be negative!!!!! There are so many rumors flying around out there, it really is hard to keep up.

Another rumor is that the appraisal process is deteriorating. Oops. That’s not a rumor! That 'could be' interpreted as true by some. We are now back to elementary days where loan originators, like me, or anyone paid a 'bonus' on any type of production (ie, vested interest) cannot order the appraisal. We cannot 'talk to, or discuss', the process with appraiser. On a refinance, we cannot put an estimated value on the order form, as it may be construed as trying to ‘sway’ the appraiser. Give me a break. A disinterested party has to order randomly from our list of approved appraisers. It is assumed now that appraisers have no where with all to avoid coercion by any parties as to the outcome of value. If I was an appraiser, I would be insulted. None of the appraisers I have ever used were swayed by my opinion anyway. I am just a hot head loan officer that always wants my way. It is the few bad apples out there, that were part of fraud schemes, that have given all appraisers a bad name. This is just great. I think I need a bag of chocolate chip morsels to munch on. This is getting really stressful!

By the way, I must stress that my thoughts expressed here are not those of Patriot Bank at all. So you can make your own opinions, mine mean nothing if you so choose.

Houston Housing is Solid!

You may have noticed I have not written in a while. Well I am back after a 3 week sabbatical (wishing the excuse was vacation!) . The great news today is that everyone wants a piece of these rates! So if your pipelines have not begun to increase, they will. Remember, that the deadline for the First Time Homebuyer Tax Credit of $8,000 is Dec 1, 2009. Also….the premonition is that within 12 – 18 months, inflation will set in. Who knows where rates will go then? Our 4-5% mortgages may look really good by then. Cocktail party conversation!

Let me get the statement over with. Yes, parts of Houston are feeling the results of some minor devaluation. How could we not, with the other 49 states feeling such drastic effects? The mentality of the consumer has surely been tainted. BUT I WOULD LIKE TO POINT OUT SOME REAL, POSITIVE FACTS about why your clients should be buying now! Other than the obvious- interest rates. We must invest in our economy, if we are to turn things around.

In Houston:
Housing is Solid, with an average of 6 months supply - a healthy market! (Metro Study, Q3, 2008)
Is the #1 best city to buy a home , as rated by Forbes Magazine, August 2008,
Ranks #1 for Job Growth in the Nation - 17% of the entire country!!!!!!!!!!!!!!
Largest IT Service Economy (Onforce, Inc, December 5, 2008)
America's Best Hospitals (US News& World Report , July 2008)
Best Big City for Business (Inc.com , July 2008)
We are survivors! Think about our recovery from Allison, Enron, and recently Ike.

Patriot Bank is growing right with Houston. We are the 5th Largest Bank domiciled within the city (and we are only 5 years old!). We are THE LARGEST privately owned bank within the city. Our total assets are currently at just over 1 Billion dollars. The most important aspect of our bank, in my opinion, is that our Total Equity Capital is 12%, where our peers are at 9%. And 6% is the minimum government requirement. That is awesome, and secure!

Mortgage Industry Changes that will Rock Our Worlds

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.

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.

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!

Where is my mortgage relief?

Just when I thought my ‘drama factor’ for the week had been accomplished squashing my three year old’s meltdown over which shoes to wear, the Galleria area near our office was swarmed with helicopters and FBI agents on the roof of the Stanford Financial building. What a shame that is, seeing the destruction of yet another financial institution. Can we trust anything anymore? And then the first article on CNN Money today was “ Expect a wave of bank failures’. That may be the case, but for me , personally, I can express that I have never felt more job security in my 14 years as a mortgage originator. And I work for a bank. Patriot Bank is steadfast and strong. Not only are we the 6th largest bank domiciled in Houston, but we have been profitable since our 5th month in business after opening in March of 2005. The year ending 2008, we generated more than 4 mm in net profit, and we maintain < 1 % of net loans charged off as a percentage of loans outstanding. Not only that, our asset to debt ratio exceeds the limit set by the FDIC as a minimum bank requirement. Please know that at Patriot, we are your trusted source in mortgage lending. And we are here for the long haul.

Changing the subject……….Where is my mortgage relief? I pay my mortgage on time, and sometimes we struggle. I could use some relief! Oh, wait a minute. I need to be 3 months behind on payments to get any relief, like a lower rate, or payment, or renegotiation with my lender. At first thought, that bothered me. Should we really destroy the incentive to act responsibly? Capitalism will not work without the possibility of failure!

But a guest on CNBC Sqwak Box yesterday summed it up nicely ‘ The Kool Aid has been flowing freely for a long time, and we all drank it”. Boy did we ever! We have all benefited in some way, whether it be cashing in on our home equity, selling our house at a rock star value , stock profits, the car loan at 1.9%, the 0% credit cards, etc. If we do fail, foreign investors will lose confidence in our system. Their investments in our economy has kept us going, believe it or not. And our home values. If we allow our neighbor to foreclose, the values in our neighborhood decline. So you see, my part in all this is to continue to do the right thing. Pay my mortgage since I can, and allow those that need it, and have hardship, to benefit from the policies of recent that have been put in place. We will all be rewarded some day, when this is behind us, and we have learned the larger lesson , which has yet to be defined.

To clarify my article of last week, the First Time Homebuyer Credit of $8,000 is not required to be repaid. A first time homebuyer is defined as anyone who has not owned a home in the last THREE years.

Product of the Week: Check out the 5 and 7 ARM Jumbo Rates below! 4.75% !