Federal legislation (H.R. 3915) affecting our industry will be heard by the House Finance Committee in Washington D.C. on Tuesday, November 6th. While this proposed legislation includes items that our industry does support, such as broker registration, continuing education, etc, there are a number of items being considered which will make it even more difficult to get a mortgage or a competitive rate. This is another example of government coming to the rescue after the market has already corrected and adjusted. If anything I think the government should pass laws to make predatory lending practices illegal and impose sever penalties on the violators. Trying to change and destroy an entire industry because of a small number of bad eggs isn't good for anyone.
The following is a summary of the legislation
1 The Mortgage Reform and Anti-Predatory Lending Act of 2007
Section-by-Section Summary
TITLE I—MORTGAGE ORIGINATION
Sec. 101. Definitions.
Establishes definitions for various terms, including: "mortgage originator," "qualified nationwide registration regime," "qualifying state licensing law," "residential mortgage loan," and "securitizer."
Sec. 102. Residential mortgage loan origination.
Provides that all mortgage originators (including mortgage brokers and depository institutions that originate mortgages) will be subject to a federal duty of care that requires (1) licensing and registration under State or Federal law, (2) diligently working to present consumers with a range of residential mortgage loan products appropriate to the consumer’s existing circumstances, (3) making full, complete, and timely disclosures to consumers, (4) certifying to creditors compliance with mortgage origination requirements under this section, and (5) including in all loan documents the unique identifier of the mortgage originator provided by the qualified nationwide registration regime. This subsection expressly does not create an agent or fiduciary relationship, but mortgage originators are free to become an agent or a fiduciary if they so desire. HUD, OCC, OTS, and FDIC, in consultation with FTC, will jointly prescribe regulations to further define the federal duty of care.
Sec. 103. Anti-steering.
Provides that no mortgage originator can receive, and no person can pay, any incentive compensation (including yield spread premiums) that is based on or varies with the terms of a mortgage loan. HUD, OCC OTS, and FDIC, in consultation with FTC, will jointly prescribe regulations to prohibit mortgage originators from steering any consumer to a mortgage loan that is not in the consumer’s interest (such as a loan with predatory characteristics), and will seek to ensure that such regulations meet the conditions set forth in the legislation. However, nothing in this subsection should be construed as limiting the ability of a mortgage originator to sell residential mortgage loans to subsequent purchasers, or restricting a consumer’s ability to finance origination fees if they were disclosed to the consumer and do not vary with the consumer’s decision to finance such fees.
Sec. 104. Licensing and registration of mortgage originators.
Requires all mortgage originators to be licensed and registered pursuant to qualifying State licensing law or an equivalent Federal banking regime. If States do not pass qualifying laws that meet the standards set forth in the bill, then HUD will promulgate regulations requiring mortgage brokers in such States to act "solely in the best interest" of the consumer. States will have two years from the date of enactment of this Act to pass qualifying State licensing laws, and HUD will have the authority to extend this deadline by six months for individual States acting in good faith. 2
Sec. 105. Enforcement.
Provides that a cause of action will exist under section 130(a) and 130(b) of TILA for a mortgage originator’s failure to comply with this section. The maximum liability of a mortgage originator for violation of this section will not exceed three times the total amount of mortgage originator fees, plus the consumer’s costs including reasonable attorney’s fees.
Sec. 106. Regulations.
Except for the 24-month period (and possible 6-month extension) set forth in section 104 regarding HUD licensing and registration regime, regulations under this title will be promulgated within 12 months of the enactment of this Act, and take effect no later than 18 months after the enactment.
TITLE II—MINIMUM STANDARDS FOR ALL MORTGAGES
Sec. 201. Ability to repay.
Provides that no creditor may make a residential mortgage loan unless the creditor makes a reasonable and good faith determination based on verified and documented information that, at the time the loan is consummated, the consumer has a reasonable ability to repay the loan (including all applicable taxes, insurance, and assessments). OCC, OTS, and FDIC, in consultation with FTC, will jointly prescribe regulations regarding this provision. A determination of ability to repay will be based on the consumer’s credit history, current income, expected income the consumer is reasonably assured or receiving, current obligations, debt-to-income ratio, employment status, and other financial resources other than the consumer’s equity in the real property securing the loan. In making such a determination for nonstandard loans (adjustable rate loans, interest-only loans, and negative amortization loans), creditors will follow additional guidance as set forth in the legislation. To calculate monthly payments for principal and interest, creditors will make certain assumptions set forth in the legislation (including that the interest rate is a fixed rate equal to the fully indexed rate at the time of the loan closing).
Sec. 202. Net tangible benefit for refinancing of residential mortgage loans.
Provides that no creditor may extend credit for refinancing unless the creditor reasonably and in good faith determines, at the time the loan is consummated and on the basis of information known by or provided in good faith to the creditor, that the refinanced loan will provide a net tangible benefit to the consumer. The refinanced loan will not be considered to provide net tangible benefit if the costs of the loan, including points, fees, and other charges, exceed the amount of newly advanced principal. OCC, OTS, and FDIC, in consultation with FTC, will jointly prescribe regulations further defining the term "net tangible benefit."
Sec. 203. Safe harbor and rebuttable presumption.
Creditors and assignees may make the presumption, which may only be rebutted against creditors, that the minimum standards (reasonable ability to repay and net tangible benefit) are met for "qualified mortgages" and "qualified safe harbor mortgages." Qualified mortgages are prime loans with APRs that are not equal to or greater than 3% over comparable Treasuries and 175 basis points over the Federal Reserve H.15 rate for first lien loans, and 5% over comparable Treasuries and 375 basis points over the Federal Reserve H.15 rate for non-first lien loans. 3
Qualified safe harbor mortgages are loans with (1) documented consumer income, (2) underwriting process based on fully indexed rate (and taking into account taxes and insurance), (3) debt-to-income ratio not greater than 50% or some other percentage prescribed by regulation, (4) no negative amortization, (5) other requirements that may be established by regulation, AND (6) one of the following: (i) fixed payment for at least 7 years, or (ii) for adjustable-rate loans, APR that varies less than 3% over the interest-rate index. OCC, OTS, and FDIC will jointly prescribe regulations to carry out the purposes of this subsection and may make changes to these safeharbor provisions over time as products and lending practices evolve.
Sec. 204. Securitizer liability.
For loans that violate the minimum standards for reasonable ability to repay and net tangible benefits as set forth by regulation, a consumer has an individual cause of action against assignees, including securitizers, for rescission of the loan and the consumer’s costs. An assignee/securitizer will not be liable for a loan that violates the minimum standards if the assignee/securitizer: (1) provides a cure to make the loan conform to the minimum standards within 90 days of receiving notice from the consumer, or (2) (a) has a policy against buying mortgage loans that are not qualified mortgages or qualified safe harbor mortgages and exercises reasonable due diligence to adhere to such policy through a adequate, thorough, and consistently applied sampling procedure in accordance with regulations that OCC, OTS, and FDIC will jointly prescribe and (b) has obtained representations and warranties from the seller or assignor of the loan regarding not selling or assigning loans that violate the minimum standards and takes reasonable steps to obtain the benefit of such representations or warranties. Liability will not apply to pools of loans or investors in pools of loans.
Sec. 205. Defense to foreclosure.
A consumer who has the right of rescission may exercise such right when judicial or non-judicial foreclosure is initiated, and a third party may sell or assign a residential mortgage loan to an assignee, including a securitizer, to effect a rescission or a cure.
Sec. 206. Additional standards and requirements.
Prepayment Penalties: Prohibits prepayment penalties on "subprime" loans (loans that are not qualified mortgages as defined in section 203), and requires that all remaining prepayment penalties expire three months before a loan resets.
Renters in Foreclosure: In case of foreclosure, any successor in interest will take over the property subject to any bona fide lease made to bona fide tenant entered into before the notice of foreclosure. Bona fide tenants without a lease will receive at least a 90-day notice before being required to vacate.
Other Provisions: Prohibits single-premium credit insurance and mandatory arbitration. Requires securitizers to reserve the right in any document or contract establishing pools of loans to obtain access to such loans and to provide for and obtain a remedy under this title.
Sec. 207. Amendment to provision governing correction of errors.
Permits creditors to correct non-bona fide errors within 30 days of the loan closing and 4
prior to the institution of any action. Permits creditors to correct bona fide errors within 60 days of the creditors’ discovery or receipt of notification and prior to the institution of any action. A creditor may correct an error by making the loan satisfy the applicable requirements of TILA (including requirements of this Act) or changing the terms of the loan so the loan is no longer a high-cost mortgage.
Sec. 208. Amendment relating to right of rescission.
Provides that a person is not barred from asserting a right of rescission after the expiration of the statute of limitation as a defense to a foreclosure action.
Sec. 209. Amendments to civil liability provisions.
Doubles the amount of civil liability penalty currently applicable under TILA. Extends the statute of limitations from one year to three years.
Sec. 210. Rule of construction.
Except as otherwise expressly provided, no provisions of the new sections 129A and 129B added by this Act will be construed as superseding, repealing, or affecting any duty, right, obligation, privilege, or remedy of any person under any other provision of TILA.
Sec. 211. Regulations.
Regulations under this title will be promulgated within 12 months of the enactment of this Act, and take effect no later than 18 months after the enactment.
TITLE III—HIGH-COST MORTGAGES
Sec. 301. Definitions Relating to High-Cost Mortgages.
Amends the definition of high-cost mortgage in HOEPA to also include open end lines of credit. Codifies the existing Federal Reserve standard for the APR trigger which is set at 8% above comparable Treasury securities for first mortgages and Treasuries plus 10% for subordinate mortgages. Lowers the points and fee triggers from 8% to 5% for most loans. Establishes a third trigger for loans with prepayment penalties that exceed 2% or 30 months duration. Expands the definition of points and fees to include all compensation paid directly or indirectly by a consumer or creditor to a mortgage broker from any source (including table-funded transactions), certain insurance premiums, prepayment penalty charges under the loan, and prepayment penalties actually charged in a refinance by the original lender or the original lender’s affiliate. Excludes certain bona fide discount points and prepayment penalties (up to 2 points for near-market interest rate loans) from the determination of the amount of points and fees that trigger HOEPA protections.
Sec. 302. Amendments to Existing Requirements for Certain Mortgages.
Prohibits prepayment penalties on HOEPA loans with principal amounts below the FHA loan limit for a given geographical area. Prohibits balloon payments on high-cost loans unless the payment schedule is adjusted to the seasonal or irregular income of the consumer. Provides additional high-cost loan "ability to repay" protections. Creditors are allowed to consider a number of factors including current and expected income, current obligations, and employment 5
status (rebuttable presumption of ability to repay provided that the consumer’s total monthly debts do not exceed 50% of monthly gross income).
Sec. 303. Additional Requirement for Certain Mortgages.
Prohibits creditors from (1) encouraging that borrowers default on an existing loan when refinancing such existing debt with a high-cost mortgage, (2) charging multiple late fees on the same delinquent payment and caps any give late fee at 4%, (3) unilaterally accelerating the loan, (4) directly or indirectly financing points and fees for high-cost mortgages (the restriction applies to prepayment penalties if the lender or an affiliate is the noteholder of the loan being refinanced), (5) structuring loans to evade HOEPA protections, and (6) making a high-cost loan to a consumer unless the creditor has received a certification that the borrower received pre-loan counseling from a HUD-approved entity. Prohibits modification or deferral fees unless they can be proven beneficial to the consumer. Requires that creditors and servicers disclose and provide free access to payoff amounts.
Sec. 304. Regulations.
Requires the Federal Reserve Board to implement regulations under this title within six months of enactment.
Sunday, November 4, 2007
Friday, November 2, 2007
Thank God For Patient Home Buyers
I am working with a client who found a new construction home on his own and is in the process of purchasing it from the builder through the builders agent. There is no buyers agent so the process is a little more interesting than your standard fair, for instance as things change, the listing agent has been good to let their title company know, but hasn't been so good informing me, the loan officer or the buyer.
We were supposed to close on Tuesday of this week but as a result of an item or two not being quite finished, we got delayed until Friday only to come and find out that the certificate of occupancy has not been issued due to some other unfinished issues, and now the closing has been moved again to next Tuesday.
For anyone who has dealt with builders and new construction, this is par-for-the-course, but for a home buyer who has only ever bought existing homes, this has turned out to be a very confusing and frustrating event.
Lesson learned; try to remember that our buyers and sellers don't share the same experiences that we industry professionals do and try to prepare the clients in advance for every possible scenario so if and when it comes up, the client feels a little more safe and secure knowing that we called it and have a plan to take care of it.
We were supposed to close on Tuesday of this week but as a result of an item or two not being quite finished, we got delayed until Friday only to come and find out that the certificate of occupancy has not been issued due to some other unfinished issues, and now the closing has been moved again to next Tuesday.
For anyone who has dealt with builders and new construction, this is par-for-the-course, but for a home buyer who has only ever bought existing homes, this has turned out to be a very confusing and frustrating event.
Lesson learned; try to remember that our buyers and sellers don't share the same experiences that we industry professionals do and try to prepare the clients in advance for every possible scenario so if and when it comes up, the client feels a little more safe and secure knowing that we called it and have a plan to take care of it.
Tuesday, October 30, 2007
FHA Saves The Day
I'm doing an FHA loan for a client who would not be getting a loan without them. This client has had some mortgage lates and other credit issues along the way and one of the spouses is self-employeed and, like all good self-employeed people, doesn't show enough on their taxes to help the cause. As a result of the FHA loan that allows for non-occupant co-borrowers, this couple is getting into a 30 year fixed at 6.375% compared to the subprime products of late that would have given them a two year ARM at around 8.5%.
Maybe the death of sub-prime mortgages was a good thing after all?
Maybe the death of sub-prime mortgages was a good thing after all?
Friday, October 26, 2007
BofA Dumps Wholesale Lending
Bank of America is continuing to shape shift as it deals with it's own, while limited, exposure to the mortgage debacle. What this means for consumers is that now there is one less lender from who they can get a competitive rate. Typically, when a borrower goes through a retail channel of a mortgage lender, there is less room for negotiation on the interest rate and/or closing costs. Broker owners have always been able to give their clients a better deal and they are willing to do so in an effort to build repeat and referral business. The big retail mortgage shops tell their reps that they are giving value with great service, as if the brokers don't provide that.
Bottom line is there are still plenty of strong brokers out their and they are very competitive on rates and terms so do your due diligence and contact a local independent Minnesota mortgage broker before signing any papers with a lender direct rep.
Bottom line is there are still plenty of strong brokers out their and they are very competitive on rates and terms so do your due diligence and contact a local independent Minnesota mortgage broker before signing any papers with a lender direct rep.
Wednesday, October 24, 2007
Rates are improving, housing is not
Once again I have to face the headlines on the Internet reminding me that the housing market is suffering. Yahoo today touted that, "Existing Home Sales Fall To Lowest Level In Eight Years".
Oh Well, the good news is that one of my lenders has lowered their rates and is offering a 30 year fixed conforming mortgage at 5.875%.
Oh Well, the good news is that one of my lenders has lowered their rates and is offering a 30 year fixed conforming mortgage at 5.875%.
Thursday, October 11, 2007
Countrywide On The Ropes
Countrywide is reeling from an attack by the two headed monster, declining mortgage fundings due in part to stricter standards, and increasing foreclosures. According to an article today from Reuters, Countrywide has eliminated 4,935 jobs in September and plans to eliminate up to another 12,000 jobs by December.
Countrywide challenges stem from the fact that a large percentage of their loans over the past few years have been in the Alt-A and non-conforming loan products, especially the dreaded Option ARM. Only Countrywide knows just how much of their business came from these sectors and if in fact it was 50% or more, we will see even more bloodletting from Countrywide as they try to adjust their business model to the current state of affairs which is consisting of conforming and FHA loans.
Add to that the fact that Countrywide has not historically had the lowest rate in the market for the traditional 30 year fixed product, at least from a wholesale point of view, and you have another factor that will put added pressure on Countrywide's already shrinking revenue stream.
All in all I think Countrywide will survive this tragedy but not without quite a bit more pain and suffering in the coming months.
Countrywide challenges stem from the fact that a large percentage of their loans over the past few years have been in the Alt-A and non-conforming loan products, especially the dreaded Option ARM. Only Countrywide knows just how much of their business came from these sectors and if in fact it was 50% or more, we will see even more bloodletting from Countrywide as they try to adjust their business model to the current state of affairs which is consisting of conforming and FHA loans.
Add to that the fact that Countrywide has not historically had the lowest rate in the market for the traditional 30 year fixed product, at least from a wholesale point of view, and you have another factor that will put added pressure on Countrywide's already shrinking revenue stream.
All in all I think Countrywide will survive this tragedy but not without quite a bit more pain and suffering in the coming months.
Tuesday, October 9, 2007
Another lender eliminates Stated Income Mortgages
I just received this email from one of by larger national lenders, CITI mortgage;
It's a real bummer for home owners, home buyers, and the mortgage and real estate professions as this just makes it a little tougher to get a good mortgage if you are self employed or if your spouse contributes to your household income but because of their credit score, you don't want to have them on the loan.
Stay tuned as I think this trend will turn around in the next 6 months and in fact there still are lenders who are offering stated income mortgages in Minnesota and around the country.
Feel free to call me at 612-251-8237 if you are looking for a stated loan product.
"Greetings,
I was informed today that our Stated Income Verified Assets
program is going away effective Monday (10-15-07). We will be honoring all SIVA
deals submitted before midnight through Sunday at our web site. I've attached
our current rates and feel free to contact me with questions. Again effective
Monday we will be doing full doc loans/lines only.
Thanks for your time. "
It's a real bummer for home owners, home buyers, and the mortgage and real estate professions as this just makes it a little tougher to get a good mortgage if you are self employed or if your spouse contributes to your household income but because of their credit score, you don't want to have them on the loan.
Stay tuned as I think this trend will turn around in the next 6 months and in fact there still are lenders who are offering stated income mortgages in Minnesota and around the country.
Feel free to call me at 612-251-8237 if you are looking for a stated loan product.
Minnesota Mortgage rates update
Minnesota mortgage rates are fairly unchanged today, Tuesday October 9th.
30 year fixed rates are at 6.375% (with a 30 day lock)
15 year fixed rates are at 6.000%
Most lenders are continuing to price the 3,5, and 7 year ARM out of the market as no investor wants to buy them.
Subprime mortgage rates have really gotten horrible in Minnesota ever since the Minnesota Attorney General ran pre-payments out of the state. If you have less than a 660 middle credit score, it's going to be tough for you to find a great deal unless you have some equity in your home. Visit www.firsthomeguide.com for a free credit score estimate.
30 year fixed rates are at 6.375% (with a 30 day lock)
15 year fixed rates are at 6.000%
Most lenders are continuing to price the 3,5, and 7 year ARM out of the market as no investor wants to buy them.
Subprime mortgage rates have really gotten horrible in Minnesota ever since the Minnesota Attorney General ran pre-payments out of the state. If you have less than a 660 middle credit score, it's going to be tough for you to find a great deal unless you have some equity in your home. Visit www.firsthomeguide.com for a free credit score estimate.
Friday, October 5, 2007
Minnesota Mortgage Rates update for October 5th
Wow time flies when you aren't getting around to writing in your blog. I promised myself I would stick to a writing schedule a month ago and obviously I had some trouble with that commitment. Sorry for that, I will continue to improve on my writing and my consistency.
Anyway, here are some current mortgage rates for people in Minnesota;
30 year fixed 6.375%
15 year fixed 6.000%
The 3, 5 and 7 year conforming ARMs have rates higher than the 30 year fixed so it would be crazy to even consider them.
Matt Carter of Inman News posted a great question today regarding the revising of the jobs data by our infinitely wise government officials and it's potential affects on rates and markets
Call me, Ken Horst, with any question at 612-251-8237 about these Minnesota mortgage rates and programs or any other mortgage programs you may be interested in.
Anyway, here are some current mortgage rates for people in Minnesota;
30 year fixed 6.375%
15 year fixed 6.000%
The 3, 5 and 7 year conforming ARMs have rates higher than the 30 year fixed so it would be crazy to even consider them.
Matt Carter of Inman News posted a great question today regarding the revising of the jobs data by our infinitely wise government officials and it's potential affects on rates and markets
Call me, Ken Horst, with any question at 612-251-8237 about these Minnesota mortgage rates and programs or any other mortgage programs you may be interested in.
Saturday, September 8, 2007
Find a Red Realtor On Mars
I got a call yesterday from a telemarketer trying to sell me Internet advertising. Having owned and managed a half dozen real estate related web sites over the past 5 years, I have some idea about web traffic, search engine optimization, and "Who's Who" in real estate directories, portals and destinations, Realtor.com being one of the most obvious. This gal proceeded to tell me that a web site geared towards Realtors that I have never heard of was getting 2 million hits per month. A pretty amazing feat considering some of the biggest and best known websites in real estate don't get a whole lot more traffic than that. But as I am always willing to learn and grow, I decided to let this telemarketer explain Internet marketing to me and how I needed to act today to take advantage of the great special she was only offering until the end of the day.
When I checked out the site my first impression is that I am under-whelmed. The site looked cheap and more like one of those domain names that cyber-squatters use to sell Google ads. When I asked her how people found her site she told me through search engines like Google, (she even asked me if I had heard of Google which I thought was cute) and a few other far more obscure search engines that many of us have never heard of. She did however inform me that these other search engines were the up and coming search engines of the younger generation so I should care. ( she was referring to dogpile, ask, and metacrawler, which have been around forever.)
When I asked her what keywords or phrases would bring her site up, she told me "find a realtor". Little did she know, I spend many hours a week doing keyword research, and I can tell you with great certainty that the phrase "find a realtor" does not get typed in 2 million times per month. Anyway, in an effort to really impress me she suggested I typed in "find a red Realtor on Mars", which I did and in fact the site she was promoting did come up on top. Impressive I told her, how much for the Mars territory I asked. She wasn't sure but she thought it would be very expensive. I think she was being facetious.
Bottom line is she wanted me to dole out $799 for a platinum listing in one city, and she would give me a one line listing in 3 other cities. I asked her what happens if someone else wants to advertise in the same city to which she replied they would appear under your listing. How many Realtors would you sell the same city too, I asked. She said as many as wanted to buy into it. But surely I said that an agent buying in at the 10th place wasn't going to be charged the same $799 as the agent who got the first place. Oh yes she said, everyone pays the same price after which she told me that they currently have 4000 agents signed up.
Two things came to mind as we concluded our call, number one, I thought that was a little pricey since I know there are far higher ranked sites offering premium placement for 5 cities and unlimited property listings for $29.99/month, and two, it couldn't be possible that there are 4000 Realtors or people in any other profession dumb enough to think this was a good deal.
So beware if you get a call from a telemarketer telling you to search Google for the phrase "find a red Realtor on Mars", odds are you could find a better place to spend your internet advertising dollars.
When I checked out the site my first impression is that I am under-whelmed. The site looked cheap and more like one of those domain names that cyber-squatters use to sell Google ads. When I asked her how people found her site she told me through search engines like Google, (she even asked me if I had heard of Google which I thought was cute) and a few other far more obscure search engines that many of us have never heard of. She did however inform me that these other search engines were the up and coming search engines of the younger generation so I should care. ( she was referring to dogpile, ask, and metacrawler, which have been around forever.)
When I asked her what keywords or phrases would bring her site up, she told me "find a realtor". Little did she know, I spend many hours a week doing keyword research, and I can tell you with great certainty that the phrase "find a realtor" does not get typed in 2 million times per month. Anyway, in an effort to really impress me she suggested I typed in "find a red Realtor on Mars", which I did and in fact the site she was promoting did come up on top. Impressive I told her, how much for the Mars territory I asked. She wasn't sure but she thought it would be very expensive. I think she was being facetious.
Bottom line is she wanted me to dole out $799 for a platinum listing in one city, and she would give me a one line listing in 3 other cities. I asked her what happens if someone else wants to advertise in the same city to which she replied they would appear under your listing. How many Realtors would you sell the same city too, I asked. She said as many as wanted to buy into it. But surely I said that an agent buying in at the 10th place wasn't going to be charged the same $799 as the agent who got the first place. Oh yes she said, everyone pays the same price after which she told me that they currently have 4000 agents signed up.
Two things came to mind as we concluded our call, number one, I thought that was a little pricey since I know there are far higher ranked sites offering premium placement for 5 cities and unlimited property listings for $29.99/month, and two, it couldn't be possible that there are 4000 Realtors or people in any other profession dumb enough to think this was a good deal.
So beware if you get a call from a telemarketer telling you to search Google for the phrase "find a red Realtor on Mars", odds are you could find a better place to spend your internet advertising dollars.
Thursday, September 6, 2007
FHASecure coming soon to Minnesota
Some of you may have heard on the news lately about a new goverment backed mortgage program designed to protect people from losing their homes due to their adjustable rate going up. This new program is being called "FHA Secure" and it will become available on January 1, 2008. While this program will not help Minnesota first time home buyers, it is a great program for distressed Minnesota homeowners. For more info on first time home buyer programs, check out www.firsthomeguide.com, otherwise for more information on the FHASecure program, check out this press release from FHA that came out on August 31, 2007;
For ReleaseFridayAugust 31, 2007
BUSH ADMINISTRATION TO HELP NEARLY ONE-QUARTER OF A MILLION HOMEOWNERS REFINANCE, KEEP THEIR HOMESFHA to implement new "FHASecure" refinancing product
WASHINGTON - President George W. Bush today announced that HUD's Federal Housing Administration (FHA) will help an estimated 240,000 families avoid foreclosure by enhancing its refinancing program effective immediately. Under the new FHASecure plan, FHA will allow families with strong credit histories who had been making timely mortgage payments before their loans reset-but are now in default-to qualify for refinancing.
In addition, FHA will implement risk-based premiums that match the borrower's credit profile with the insurance premium they pay-i.e., riskier borrowers pay more. This common-sense, risk-based pricing structure will begin on January 1, 2008.
"Many hard-working American families who were able to make their mortgage payments under the initial teaser terms of the exotic loan are now struggling to make ends meet because their rates have doubled or tripled," said HUD Secretary Alphonso Jackson. "FHASecure will bring stability to the housing market and give eligible families who were in good financial standing before their loans reset a chance to keep their homes."
The combination of FHASecure and risk-based premium pricing will permit FHA to return to the role it was originally designed to play, bringing stability to the real estate market by helping break today's cycle of foreclosures and price depreciation and creating much needed liquidity in the now-constricted mortgage market.
FHA has recently experienced a substantial increase in the number of conventional borrowers refinancing into FHA products. With FHASecure, it can help even more. The number of these refinancing transactions has tripled since the start of 2006. FHA's transactions are projected to surpass 100,000 loans by the end of the fiscal year. To date, these figures do not include refinances for delinquent borrowers.
The FHASecure initiativewill operate under the same safe guidelines as the FHA's existing mortgage insurance program without affecting FHA's financial health. Eligible homeowners will be required to meet strict underwriting guidelines and pay a mortgage insurance premium, which offsets the risk to FHA's insurance fund at no cost to the taxpayer.
The risk-based insurance premium structure will further expand FHA's reach to additional underserved borrowers, particularly minorities and first-time homebuyers who have been disproportionately lured into exotic mortgages, and enhance the FHA's overall risk management. The move to risk-based premiums ensures that FHA remains on solid financial footing as a self-financed agency for the long-term.
FHASecure, like all FHA products, will be underwritten to ensure the borrowers have the ability to repay the loan, will require escrow for taxes and insurance, and will continue to offer unprecedented foreclosure prevention assistance. The FHA has never permitted and will not include pre-payment penalties or teaser rates that are common in exotic mortgages and have caused much of the current market troubles.
To qualify for FHASecure, eligible homeowners must meet the following five criteria:
A history of on-time mortgage payments before the borrower's teaser rates expired and loans reset;
Interest rates must have or will reset between June 2005 and December 2009;
Three percent cash or equity in the home;
A sustained history of employment; and
Sufficient income to make the mortgage payment.
"FHASecure is designed for families who are good borrowers but were steered into high-cost loans with teaser rates," said Assistant Secretary for Housing-FHA Commissioner Brian Montgomery. "These homeowners, many of whom are minorities, need a safe, affordable mortgage product that will help build wealth. All FHA borrowers pay mortgage insurance premiums to offset claims to the FHA insurance fund and ultimately prevent risk to the taxpayer."
FHASecure will also bring much-needed liquidity to the mortgage market. FHA anticipates more lenders will offer FHA-insured loans, pool them, and securitize them with the Government National Mortgage Association (Ginnie Mae), which has the full faith and credit of the U.S. government. This guarantee makes Ginnie Mae's mortgage-backed securities the safest on the market and helps to channel greater capital into the housing market, benefiting U.S. homeowners.
Since its inception in 1934, FHA has helped almost 35 million people become homeowners, making it the largest insurer of mortgages in the world. The 109th Congress introduced the Expanding American Homeownership Act in June 2006 which would enable FHA to be a safe option for more underserved low- and moderate-income and minority families so they can achieve the American Dream of homeownership. Today, President Bush also urged Congress to quickly pass the Administration's FHA modernization proposal to help more families in need.
The good news is this program is coming, the bad news is it won't be here until January 2007. There may be other options in the mean time so if you find yourself in trouble you should call a local minnesota mortgage broker or the lender who you have your loan with to discuss what options they can make to help you out. Many lenders will be making concessions to their borrowers in the coming months to avoid foreclosing on them.
For ReleaseFridayAugust 31, 2007
BUSH ADMINISTRATION TO HELP NEARLY ONE-QUARTER OF A MILLION HOMEOWNERS REFINANCE, KEEP THEIR HOMESFHA to implement new "FHASecure" refinancing product
WASHINGTON - President George W. Bush today announced that HUD's Federal Housing Administration (FHA) will help an estimated 240,000 families avoid foreclosure by enhancing its refinancing program effective immediately. Under the new FHASecure plan, FHA will allow families with strong credit histories who had been making timely mortgage payments before their loans reset-but are now in default-to qualify for refinancing.
In addition, FHA will implement risk-based premiums that match the borrower's credit profile with the insurance premium they pay-i.e., riskier borrowers pay more. This common-sense, risk-based pricing structure will begin on January 1, 2008.
"Many hard-working American families who were able to make their mortgage payments under the initial teaser terms of the exotic loan are now struggling to make ends meet because their rates have doubled or tripled," said HUD Secretary Alphonso Jackson. "FHASecure will bring stability to the housing market and give eligible families who were in good financial standing before their loans reset a chance to keep their homes."
The combination of FHASecure and risk-based premium pricing will permit FHA to return to the role it was originally designed to play, bringing stability to the real estate market by helping break today's cycle of foreclosures and price depreciation and creating much needed liquidity in the now-constricted mortgage market.
FHA has recently experienced a substantial increase in the number of conventional borrowers refinancing into FHA products. With FHASecure, it can help even more. The number of these refinancing transactions has tripled since the start of 2006. FHA's transactions are projected to surpass 100,000 loans by the end of the fiscal year. To date, these figures do not include refinances for delinquent borrowers.
The FHASecure initiativewill operate under the same safe guidelines as the FHA's existing mortgage insurance program without affecting FHA's financial health. Eligible homeowners will be required to meet strict underwriting guidelines and pay a mortgage insurance premium, which offsets the risk to FHA's insurance fund at no cost to the taxpayer.
The risk-based insurance premium structure will further expand FHA's reach to additional underserved borrowers, particularly minorities and first-time homebuyers who have been disproportionately lured into exotic mortgages, and enhance the FHA's overall risk management. The move to risk-based premiums ensures that FHA remains on solid financial footing as a self-financed agency for the long-term.
FHASecure, like all FHA products, will be underwritten to ensure the borrowers have the ability to repay the loan, will require escrow for taxes and insurance, and will continue to offer unprecedented foreclosure prevention assistance. The FHA has never permitted and will not include pre-payment penalties or teaser rates that are common in exotic mortgages and have caused much of the current market troubles.
To qualify for FHASecure, eligible homeowners must meet the following five criteria:
A history of on-time mortgage payments before the borrower's teaser rates expired and loans reset;
Interest rates must have or will reset between June 2005 and December 2009;
Three percent cash or equity in the home;
A sustained history of employment; and
Sufficient income to make the mortgage payment.
"FHASecure is designed for families who are good borrowers but were steered into high-cost loans with teaser rates," said Assistant Secretary for Housing-FHA Commissioner Brian Montgomery. "These homeowners, many of whom are minorities, need a safe, affordable mortgage product that will help build wealth. All FHA borrowers pay mortgage insurance premiums to offset claims to the FHA insurance fund and ultimately prevent risk to the taxpayer."
FHASecure will also bring much-needed liquidity to the mortgage market. FHA anticipates more lenders will offer FHA-insured loans, pool them, and securitize them with the Government National Mortgage Association (Ginnie Mae), which has the full faith and credit of the U.S. government. This guarantee makes Ginnie Mae's mortgage-backed securities the safest on the market and helps to channel greater capital into the housing market, benefiting U.S. homeowners.
Since its inception in 1934, FHA has helped almost 35 million people become homeowners, making it the largest insurer of mortgages in the world. The 109th Congress introduced the Expanding American Homeownership Act in June 2006 which would enable FHA to be a safe option for more underserved low- and moderate-income and minority families so they can achieve the American Dream of homeownership. Today, President Bush also urged Congress to quickly pass the Administration's FHA modernization proposal to help more families in need.
The good news is this program is coming, the bad news is it won't be here until January 2007. There may be other options in the mean time so if you find yourself in trouble you should call a local minnesota mortgage broker or the lender who you have your loan with to discuss what options they can make to help you out. Many lenders will be making concessions to their borrowers in the coming months to avoid foreclosing on them.
Friday, August 31, 2007
White Horse is Coming for Subprime Borrowers
President Bush chimed in today and is talking about a plan to help diminish the effects of the "Great Mortgage Debacle of 07". Imagine that!
I had commented on a post on Activerain by Jay Beckingham yesterday regarding his belief that there will be no replacement for the subprime mortgage. I had suggested that upon further review and analysis, investors will recreate and deliver a new set of subprime mortgage vehicles that will perform. When I wrote that post I imagined that these new sub prime mortgages would start to show up in 3-6 months. Now I am even more confident that we will see a new set of mortgage products aimed at the sub prime borrowers because now, our president is getting into the mix. For more about Bush's plan, you can read the AP article, Bush Outlines Aid for Mortgage Holders. I'm not sure exactly how this will help home buyers but it is definitely something that needs to happen to help keep a lid on the foreclosure rate.
Mark my words, we will see a re-emergence of the subprime category in the mortgage industry in the near future, 3-6 months, but it will definitely be more conservative than the flimflam of the past 5 years.
Thanks Mr. president, now maybe Wall street can have a good day.
I had commented on a post on Activerain by Jay Beckingham yesterday regarding his belief that there will be no replacement for the subprime mortgage. I had suggested that upon further review and analysis, investors will recreate and deliver a new set of subprime mortgage vehicles that will perform. When I wrote that post I imagined that these new sub prime mortgages would start to show up in 3-6 months. Now I am even more confident that we will see a new set of mortgage products aimed at the sub prime borrowers because now, our president is getting into the mix. For more about Bush's plan, you can read the AP article, Bush Outlines Aid for Mortgage Holders. I'm not sure exactly how this will help home buyers but it is definitely something that needs to happen to help keep a lid on the foreclosure rate.
Mark my words, we will see a re-emergence of the subprime category in the mortgage industry in the near future, 3-6 months, but it will definitely be more conservative than the flimflam of the past 5 years.
Thanks Mr. president, now maybe Wall street can have a good day.
Thursday, August 30, 2007
100% Financing Alive and Well in Minnesota!
Contrary to popular belief, it is still possible to purchase a home in Minnesota with no down payment. There are two great programs for Minnesota home buyers and most people can qualify for one or the other of these programs. While the 100% sub-prime loan is currently very hard to find if not completely gone, the FHA program still makes purchasing a home possible, even for people who don’t quite fit into the conforming or “A” credit” box. If you’re a Minnesota First Time Home Buyer or buying your next home, check out these great Minnesota mortgage options.
Below are some of the features of these two great Minnesota home buyer programs, feel free to call me if you have any questions about either one in Minnesota.
FHA Program
No credit score requirements
No income limit
Fixed rate and ARMs available
97% financing with 3% gift funds
Up to 6% seller contribution allowed
2-1 rate buy down available
$263,150 loan limit on single family
Co-signed loans allowed (must be relative)
Higher qualifying ratios
Manufactured homes allowed
Controlled closing costs
Purchase or refinance
No Pre-payment penalties
Below are some of the features of these two great Minnesota home buyer programs, feel free to call me if you have any questions about either one in Minnesota.
MY Community Program
Allows up to 100% financing
Low credit scores allowed
Higher qualifying ratios
40 Year Amortization available
Up to 6% seller contribution
No MI options available
2-1 buy downs allowed
Loan size up to $417,000
Standard appraisal requirements
Purchase or refinance (cash-out not allowed)
No Pre-payment penalties
Allows up to 100% financing
Low credit scores allowed
Higher qualifying ratios
40 Year Amortization available
Up to 6% seller contribution
No MI options available
2-1 buy downs allowed
Loan size up to $417,000
Standard appraisal requirements
Purchase or refinance (cash-out not allowed)
No Pre-payment penalties
FHA Program
No credit score requirements
No income limit
Fixed rate and ARMs available
97% financing with 3% gift funds
Up to 6% seller contribution allowed
2-1 rate buy down available
$263,150 loan limit on single family
Co-signed loans allowed (must be relative)
Higher qualifying ratios
Manufactured homes allowed
Controlled closing costs
Purchase or refinance
No Pre-payment penalties
If you need a real estate agent to help you buy or sell your home, use our real estate agent directory
Wednesday, August 29, 2007
Will Falling Home Prices Mean Lower Property Taxes?
Well if there is any silver lining in the current home market it is that falling home prices should lead to lower property taxes right? We’ll see. It is pretty unlikely that the counties are going to be quick to spend the money to re-value anyone’s home only to find out that the county is going to receive less in property taxes. It is going to be up to us, the home owners to do our own checking and if there is a glaring discrepancy, we’ll need to get a new appraisal and go to the county to ask for an adjustment.
Just a thought.
Use the links below to check average home prices for your metro area and to find links to your counties web site so you can double check your tax appraised value.
City and county links – for property tax information
Median sales prices of existing single family homes
Just a thought.
Use the links below to check average home prices for your metro area and to find links to your counties web site so you can double check your tax appraised value.
City and county links – for property tax information
Median sales prices of existing single family homes
Tuesday, August 28, 2007
Another purchase closing delayed
I participated in a purchase closing today that should have gone better than it did. We started closing about a half hour late and ultimately got the purchase closed and funded. Fortunately the sellers had already had their purchase closing a week earlier so this delay really didn't inconvenience anyone too terribly bad. That said, It was troubling to me to be the quarterback on a deal that got delayed, especially since we had our clear-to-close and good-to-go 5 days before. So what happened?
The lender I used, who I picked because of their phenomenally low rates has a policy of getting a verbal VOE (verification of employment) 24 hours before closing. All they need to do is get someone from the company on the phone who will verify that the borrower is still working there. Seems easy enough right? Wrong.
What happens if the lender calls the company for the VOE and the only person who can provide that information is gone for the day. Hard to believe in a company with thousands of employees that only one person can verify employment, but in this case it was true.
No big deal, just call the company first thing in the morning and everything will be fine as the closing package is all ready to go, the lender simply needs the VOE to release it. The closing isn't scheduled until 10:00a.m. so it won't be a problem, right? Wrong.
What if the next morning, bright and early your lender calls the employer and gets voice mail? We'll you say, simply leave a voice mail and they will call you right back, after all, the HR person probably doesn't have much else going on, right?
OK, so now it is 9:30a.m. and we still don't have our VOE or the closing package. The client is calling, the title company is calling, things are starting to heat up. So I ask my assistant, who is really good at her job, to try to get through to a decision maker so we can get or VOE and close this on time.
Oh she gets through alright only to have someone in HR tell her they do not do verbal VOEs and that we will need to send them the VOE as a document, and someone will fill it out and get it back to us in 7-10 days. Which is sort of a problem for us since we are scheduled to close this purchase loan in about 10 minutes.
So how did it finally end you ask? My assistant was able to get the HR person on the phone and explain the urgency of the situation and how it would have been difficult to plan ahead as this last event was lender driven and it is their policy to check for employment 24 hours before the close. Some how this person was able to miraculously give us our VOE in a matter of minutes and we were able to sit down and close only 30 minutes behind schedule.
So what's the lesson learned here? I think it is a lesson I have learned about 50 time in this business which is no matter how well prepared you or the other parties to a closing are, it never fails that something can and/or will go wrong and it's not about who's fault it is or who is to blame, but how can we quickly resolve the issue and get the job done.
The lender I used, who I picked because of their phenomenally low rates has a policy of getting a verbal VOE (verification of employment) 24 hours before closing. All they need to do is get someone from the company on the phone who will verify that the borrower is still working there. Seems easy enough right? Wrong.
What happens if the lender calls the company for the VOE and the only person who can provide that information is gone for the day. Hard to believe in a company with thousands of employees that only one person can verify employment, but in this case it was true.
No big deal, just call the company first thing in the morning and everything will be fine as the closing package is all ready to go, the lender simply needs the VOE to release it. The closing isn't scheduled until 10:00a.m. so it won't be a problem, right? Wrong.
What if the next morning, bright and early your lender calls the employer and gets voice mail? We'll you say, simply leave a voice mail and they will call you right back, after all, the HR person probably doesn't have much else going on, right?
OK, so now it is 9:30a.m. and we still don't have our VOE or the closing package. The client is calling, the title company is calling, things are starting to heat up. So I ask my assistant, who is really good at her job, to try to get through to a decision maker so we can get or VOE and close this on time.
Oh she gets through alright only to have someone in HR tell her they do not do verbal VOEs and that we will need to send them the VOE as a document, and someone will fill it out and get it back to us in 7-10 days. Which is sort of a problem for us since we are scheduled to close this purchase loan in about 10 minutes.
So how did it finally end you ask? My assistant was able to get the HR person on the phone and explain the urgency of the situation and how it would have been difficult to plan ahead as this last event was lender driven and it is their policy to check for employment 24 hours before the close. Some how this person was able to miraculously give us our VOE in a matter of minutes and we were able to sit down and close only 30 minutes behind schedule.
So what's the lesson learned here? I think it is a lesson I have learned about 50 time in this business which is no matter how well prepared you or the other parties to a closing are, it never fails that something can and/or will go wrong and it's not about who's fault it is or who is to blame, but how can we quickly resolve the issue and get the job done.
Monday, August 27, 2007
Minnesota Mortgage Rates for 8/27/2007
Wow! Good news for home buyers, 30 year fixed rates are closing in on the 6% mark again. As you may have seen recently, mortgage rates have been coming down and today, in Minnesota the mortgage rates are as follows;
30 year fixed rate = 6.125%
15 year fixed rate = 5.875%
These are conforming rates which means the loan amount must be under $417,000. Not to be confused with the purchase price. These rates are also based on 80% loan to value (LTV) whether a purchase or refinance and the borrowers must be able to prove income with pay stubs and w-2s, or tax returns.
These rates are from one of my conforming lenders who typically beats all other lenders in the Minneapolis metro. This lender offers great rates for other types of mortgages as well.
Call for rates on other programs, Ken Horst@ 952-842-8100
30 year fixed rate = 6.125%
15 year fixed rate = 5.875%
These are conforming rates which means the loan amount must be under $417,000. Not to be confused with the purchase price. These rates are also based on 80% loan to value (LTV) whether a purchase or refinance and the borrowers must be able to prove income with pay stubs and w-2s, or tax returns.
These rates are from one of my conforming lenders who typically beats all other lenders in the Minneapolis metro. This lender offers great rates for other types of mortgages as well.
Call for rates on other programs, Ken Horst@ 952-842-8100
Sunday, August 26, 2007
Sun Trust Eliminates 100% combo mortgages
In response to growing industry-wide concerns regarding the uncertainty in today's secondary market, effective Monday, August 27, 2007, SunTrust Mortgage is eliminating the Combo 100 loan program.
So what does this mean to Minnesota Realtors?
Fewer borrowers will be able to buy homes.
Sun Trust is just one of many lenders who have been cutting their high loan-to-value programs lately. I would say by the end of September, there will be few if any options for people who don't qualify for conforming financing, Fannie Mae or Freddie Mac, and who don't have any money for a down payment. This is a category known as Alt-A and it is quickly disappearing as investors are running for cover as home values are flat or declining in many markets. The 100% financing category, while still alive through Fannie Mae and Freddie Mac, will all but disappear in the Alt-A and sub-prime markets. As a result, fewer people will be able to qualify to buy a home.
Now more than ever it is important for Realtors to quickly refer their buyer prospects to a capable mortgage professional for pre-qualifying and preferably a broker who has access to many different lender just in case the lender they are using goes out of business or cancels the mortgage program your buyer was qualified for.
For more information about which types of mortgage programs are still available and which are gone, contact Ken Horst at 952-842-8100.
So what does this mean to Minnesota Realtors?
Fewer borrowers will be able to buy homes.
Sun Trust is just one of many lenders who have been cutting their high loan-to-value programs lately. I would say by the end of September, there will be few if any options for people who don't qualify for conforming financing, Fannie Mae or Freddie Mac, and who don't have any money for a down payment. This is a category known as Alt-A and it is quickly disappearing as investors are running for cover as home values are flat or declining in many markets. The 100% financing category, while still alive through Fannie Mae and Freddie Mac, will all but disappear in the Alt-A and sub-prime markets. As a result, fewer people will be able to qualify to buy a home.
Now more than ever it is important for Realtors to quickly refer their buyer prospects to a capable mortgage professional for pre-qualifying and preferably a broker who has access to many different lender just in case the lender they are using goes out of business or cancels the mortgage program your buyer was qualified for.
For more information about which types of mortgage programs are still available and which are gone, contact Ken Horst at 952-842-8100.
Saturday, August 25, 2007
Minnesota Mortgage Professionals?
I got a call from a woman on Wednesday of this past week wanting to refinance her home. It turns out she had already gone through all the steps with another Minnesota mortgage professional but was puzzled when he stopped returning her calls, even after she paid for an appraisal and completed all the paper work.
At first I suspected that the appraisal didn't come in with a high enough value, or she simply didn't qualify for any programs that would benefit her so the other guy simply slipped away in search of a better mortgage prospect. On further analysis, I discovered that there was plenty of value in her home, as a matter of fact, she was only borrowing 65% of the value of her home. Additionally, she had good solid income and job history, a low debt-to-income ratio, and a descent credit score. Where did the other guy go? If anyone runs into him around town, please thank him for me.
As a result of his unprofessional service to his client, I not only gained a client for August, but as a result of my follow-up, honesty, and speed of delivery, I expect to earn some referrals as well.
I think people looking for mortgages in Minnesota will be running into this "disappearing mortgage guy" scenario more and more in the coming months as more mortgage lenders go out of business and many of the loan programs that we were able to offer only three months ago are no longer available to Minnesota home owners and home buyers.
I would have said you can thank the Minnesota Attorney General for this but unfortunately for us and for her, as she put a lot of work into saving the people of Minnesota from the evil independent mortgage broker, Wall Street beat her to it by simply not offering mortgage programs that didn't perform well for investors.
In a future post I will cover all the mortgage programs that are no longer available and what affect this is going to have on home owners in Minnesota and around the country.
At first I suspected that the appraisal didn't come in with a high enough value, or she simply didn't qualify for any programs that would benefit her so the other guy simply slipped away in search of a better mortgage prospect. On further analysis, I discovered that there was plenty of value in her home, as a matter of fact, she was only borrowing 65% of the value of her home. Additionally, she had good solid income and job history, a low debt-to-income ratio, and a descent credit score. Where did the other guy go? If anyone runs into him around town, please thank him for me.
As a result of his unprofessional service to his client, I not only gained a client for August, but as a result of my follow-up, honesty, and speed of delivery, I expect to earn some referrals as well.
I think people looking for mortgages in Minnesota will be running into this "disappearing mortgage guy" scenario more and more in the coming months as more mortgage lenders go out of business and many of the loan programs that we were able to offer only three months ago are no longer available to Minnesota home owners and home buyers.
I would have said you can thank the Minnesota Attorney General for this but unfortunately for us and for her, as she put a lot of work into saving the people of Minnesota from the evil independent mortgage broker, Wall Street beat her to it by simply not offering mortgage programs that didn't perform well for investors.
In a future post I will cover all the mortgage programs that are no longer available and what affect this is going to have on home owners in Minnesota and around the country.
Wednesday, August 22, 2007
Why Use A Mortgage Broker?
Because if Countrywide were to declare bankruptcy, your local experienced mortgage broker still has great mortgage products from quality lenders like Wells Fargo. Here is a recent memo from Wells Fargo to the mortgage broker community;
Together, We’ll Succeed
Since 1852, Wells Fargo has been delivering superior service to its customers based on their business needs. In today’s mortgage market, Wells Fargo stands out as a lender who is committed to its clients – one with a long track record of strength and stability.
Wells Fargo is a well capitalized, diversified financial services company – the only bank in the U.S., and one of only two banks worldwide, to have the highest credit rating from both Moody's Investors Service, "Aaa," and Standard & Poor's Ratings Services, "AAA." In other words, we have the financial strength to succeed in this market and continue to serve your lending needs.
There is no question that Wells Fargo Wholesale Lending’s success comes from our relationships with you, our quality brokers. We remain strongly committed to you and to the wholesale business.
Here’s How Wells Fargo Can Help You Be Successful
Products and Pricing: We remain committed to offering a range of lending options, including conforming, government and home equity loans and lines – with competitive pricing to help you fulfill the needs of your customers. Plus, we recently announced price improvements on some of our products, giving you even more to offer your customers.
Our Veteran Sales Team: Our account executives have tremendous mortgage experience and they’re eager to work with you to create a plan for success in this challenging market. They can answer any questions you have about our product sets, our pricing specials, program options, and our Direct ExpressSM loan feedback tool.
Operations and Customer Support: We have great teams prepared to serve you – experienced people to underwrite and process your files quickly and smoothly. And, we have knowledgeable support teams ready to answer your questions, discuss scenarios and smooth out any wrinkles that might arise.
Today, more than ever, you need a lender you can count on. Wells Fargo’s been going strong for more than 150 years. Rest assured we’re ready to deliver on the needs of your business, now and in the future.
Regards,
Kathleen Vaughan
Executive Vice President, National Manager
Wells Fargo Wholesale Lending
Don't be to quick to kick your mortgage broker to the curb. The good ones are in this business for the long haul and will continue to protect you and your home buying clients by maintaining many lender relationships to cover any catastrophe caused by a giant like Countrywide going out of business.
Together, We’ll Succeed
Since 1852, Wells Fargo has been delivering superior service to its customers based on their business needs. In today’s mortgage market, Wells Fargo stands out as a lender who is committed to its clients – one with a long track record of strength and stability.
Wells Fargo is a well capitalized, diversified financial services company – the only bank in the U.S., and one of only two banks worldwide, to have the highest credit rating from both Moody's Investors Service, "Aaa," and Standard & Poor's Ratings Services, "AAA." In other words, we have the financial strength to succeed in this market and continue to serve your lending needs.
There is no question that Wells Fargo Wholesale Lending’s success comes from our relationships with you, our quality brokers. We remain strongly committed to you and to the wholesale business.
Here’s How Wells Fargo Can Help You Be Successful
Products and Pricing: We remain committed to offering a range of lending options, including conforming, government and home equity loans and lines – with competitive pricing to help you fulfill the needs of your customers. Plus, we recently announced price improvements on some of our products, giving you even more to offer your customers.
Our Veteran Sales Team: Our account executives have tremendous mortgage experience and they’re eager to work with you to create a plan for success in this challenging market. They can answer any questions you have about our product sets, our pricing specials, program options, and our Direct ExpressSM loan feedback tool.
Operations and Customer Support: We have great teams prepared to serve you – experienced people to underwrite and process your files quickly and smoothly. And, we have knowledgeable support teams ready to answer your questions, discuss scenarios and smooth out any wrinkles that might arise.
Today, more than ever, you need a lender you can count on. Wells Fargo’s been going strong for more than 150 years. Rest assured we’re ready to deliver on the needs of your business, now and in the future.
Regards,
Kathleen Vaughan
Executive Vice President, National Manager
Wells Fargo Wholesale Lending
Don't be to quick to kick your mortgage broker to the curb. The good ones are in this business for the long haul and will continue to protect you and your home buying clients by maintaining many lender relationships to cover any catastrophe caused by a giant like Countrywide going out of business.
Tuesday, August 21, 2007
Liquidity Crisis Explained
It was just a short time ago that investors from all over the world were hot for US Mortgage Backed Securities (MBS). Historically these investment vehicles performed well as US home owners made good on their mortgage payments. Think about it, in the olden days home buyers needed at least 10% down to even qualify to buy a home. Anyone who could manage to save a 10% down payment obviously had to be very responsible with their personal finances, and this fact played out in the return and relative safety of the MBS.
All of the sudden, there was more money available for people to buy homes than consumers were demanding, a liquidity surplus you might say, and with no room to muscle in on the "A" paper conventional mortgage markets, clever investors decided to create new and different types of mortgage loans to take advantage of all this investor money. Hence the birth of the Sub Prime mortgage industry.
With very little history as to the performance of these MBS, and a very hot US real estate market, investors and home buyers plunged into the market with reckless abandonment, ultimately leading to a person who was one day out of a chapter 7 bankruptcy with only a 580 credit score qualifying for a 100% home loan. (Credit scores range from 350 -850). By all known standards, this was a loan destined for default and in the past, no investor in their right mind would have made this loan. But money kept pouring in and an endless stream of home buyers and now people wanting cash out refinancing kept showing up at their local mortgage companies door and more recently at all the internet mortgage sites that promised hundreds of thousands of dollars for unbelievably low monthly payments.
It took a while but eventually, as history started to accrue for these sub prime loans, there appeared to be higher than expected rates of delinquency and default, which brings us to today and our current liquidity crisis. As more and more investors stop investing in these sub prime MBS vehicles, there is less and less money in the US for people who want to buy or refinance homes. Couple this with the fact that even some of the conforming or non-sub prime lenders are seeing higher rates of delinquency and default, and you have a situation where the mortgage arena, which recently had more available money than it knew what to do with, now is left with only a handful of investors who only want to buy the most secure of the MBS, those made up of people with high credit scores, a good solid track record of income, money in the bank and either a down payment or significant home equity in the case of refinance.
So there you have it, Liquidity Crisis, and if you are a real estate agent or mortgage professional, boy does it hurt!
All of the sudden, there was more money available for people to buy homes than consumers were demanding, a liquidity surplus you might say, and with no room to muscle in on the "A" paper conventional mortgage markets, clever investors decided to create new and different types of mortgage loans to take advantage of all this investor money. Hence the birth of the Sub Prime mortgage industry.
With very little history as to the performance of these MBS, and a very hot US real estate market, investors and home buyers plunged into the market with reckless abandonment, ultimately leading to a person who was one day out of a chapter 7 bankruptcy with only a 580 credit score qualifying for a 100% home loan. (Credit scores range from 350 -850). By all known standards, this was a loan destined for default and in the past, no investor in their right mind would have made this loan. But money kept pouring in and an endless stream of home buyers and now people wanting cash out refinancing kept showing up at their local mortgage companies door and more recently at all the internet mortgage sites that promised hundreds of thousands of dollars for unbelievably low monthly payments.
It took a while but eventually, as history started to accrue for these sub prime loans, there appeared to be higher than expected rates of delinquency and default, which brings us to today and our current liquidity crisis. As more and more investors stop investing in these sub prime MBS vehicles, there is less and less money in the US for people who want to buy or refinance homes. Couple this with the fact that even some of the conforming or non-sub prime lenders are seeing higher rates of delinquency and default, and you have a situation where the mortgage arena, which recently had more available money than it knew what to do with, now is left with only a handful of investors who only want to buy the most secure of the MBS, those made up of people with high credit scores, a good solid track record of income, money in the bank and either a down payment or significant home equity in the case of refinance.
So there you have it, Liquidity Crisis, and if you are a real estate agent or mortgage professional, boy does it hurt!
MN Mortgage Blog Continues!!!
I'm glad to be back blogging about the mortgage business. A lot has changed in the short time since my last post on this blog but I can assure you that I will contribute on a very regular basis in an effort to help home owners, home buyers, Realtors and other mortgage professionals navigate these stormy seas.
Feel free to comment on my blogs and Iwill do my best to respond to your comments and keep an open dialogue. Also, if you want to email me with questions, comments or suggestions, my email is khorst@thegreatrate.com
That's all for now but check back tomorrow.
Feel free to comment on my blogs and Iwill do my best to respond to your comments and keep an open dialogue. Also, if you want to email me with questions, comments or suggestions, my email is khorst@thegreatrate.com
That's all for now but check back tomorrow.
Tuesday, April 17, 2007
I can remember being told that homeownership was a good thing
Minnesota has been known as one of the easiest places in the universe to purchase a home. This is about to change. After getting past the last legislative stop, the new laws will go into effect in August assuming approval from our Governor. How will individuals who are the most difficult to qualify buy homes? Simple, they won’t be able to. However, they can still rent forever. And ever. And ever.* The lenders who have taken the biggest risk the last few years have paid the ultimate price by folding. This has brought us to an enormous market correction. Isn’t this enough?
*completly sucks
*completly sucks
Wednesday, April 4, 2007
An Easter Gift from the Leader of Iran
I could be wrong but it seems to me that ever since Iran grabbed the British Sailors, certain financial markets have been on pins-and-needles. As a result of this uncertainty in the markets and the concerns about the effects of this event on oil prices among other things, I have noticed the 30 year fixed mortgage rate increasing over the past two weeks. It hasn't gone up a lot but it is noticeably higher than it was before the incident in Iran. The reason I am painfully aware of this is because I have a number of clients for whom I am watching interest rates and I have seen the rates I was quoting two weeks ago slip away a little each day. From what I can tell today, it looks like this two week trend may be coming to an end today and hopefully the rates will start to improve based on more traditional, even handed factors instead of this Pirates of the Persian Gulf story that fortunately has ended well for the British and home owners all over America.
Monday, April 2, 2007
Trigger Leads & Mortgage Pirates
Recently I had a client I was working with who called me about 3 days into the loan process and asked me if my lender had called her. I said I doubt it, the loan hadn't even been approved yet and in 6 years, I have never had nor heard of a lender calling a borrower in the middle of the process. (if at all) She said that she had received a call from someone saying her loan documents were ready and she could schedule a time to come in and sign them. She also told me that in the 3 days since I had pulled her credit as part of the loan application process, she had received no less than 10 phone calls from mortgage companies claiming they knew she was looking for a mortgage and they would be able to offer her a better deal.
What's happening is the result of a "mortgage trigger lead". It works like this, a mortgage company can ask to buy any persons name and personal info the minute that persons credit is pulled by another mortgage company. Imaging that! How better to qualify a person as a mortgage lead than to know that they have just had their credit pulled by your competition. The only problem is that the technique that is commonly used to lure someone away from there mortgage person is to promise them a better deal. Most of these promises are made to the borrower before the new mortgage person has done any qualifying and generally don't pan out. Bottom line is that if you are working with a reputable local mortgage professional that you may have even been referred to, you are probably getting a good deal on your loan. The best defense against these mortgage pirates is to ask them to send you a Good Faith Estimate and a letter guarantying the interest rate and closing costs won't change at the closing. Odds of any of these "phone room wonder boys" complying with that request are slim to none and you can get them off your phone and finish your dinner.
This whole thing really makes me mad but it should make you even more mad. In this age of privacy how is it that the credit bureaus can sell my name, credit score, loan amount, total consumer debt and other factors to any mortgage company with a ton of money.(one such marketing company charges $25,000/month for access to these leads) How is it that this information that we all thought was private is readily available to anyone to purchase? What is worse is the quality and caliber of the people who are calling us armed with this personal and private info. Using tactics like telling you your loan docs are ready, or they can beat any deal you have seen, before they have even qualified you, these mostly young kids, most of whom have never owned a home or much else for that matter, are desperately trying to close your loan as fast as they can before you figure out what is really going on. Generally these sweat shops or mortgage phone rooms are simply dialing for dollars hoping to stumble onto the one or two borrowers referred to in the famous quote, "there's a sucker born every minute".
Sadly much of the sub prime mortgage industry is based on that phrase but the fact remains that the credit bureaus are making it even easier to exploit that point by giving unscrupulous characters enough private information about us to make it seem as if they are the company we are working with. Fortunately for mortgage professionals who get most of their business from repeat clients and referrals, this ploy rarely results in the loss of a client, but it does non-the-less bring even more confusion to an already complex process.
I'm lucky, as far as I know, I haven't lost a client yet to one of these mortgage pirates but what concerns me is the increasing speed at which the calls start and the increasing number of calls. I almost feel bad for the sucker mortgage companies who are buying these leads. If they knew how many other mortgage pirates were also sold the same lead, they may be inclined to build a business around delivering on their promise and fostering long term relationships. Imagine that!
What's happening is the result of a "mortgage trigger lead". It works like this, a mortgage company can ask to buy any persons name and personal info the minute that persons credit is pulled by another mortgage company. Imaging that! How better to qualify a person as a mortgage lead than to know that they have just had their credit pulled by your competition. The only problem is that the technique that is commonly used to lure someone away from there mortgage person is to promise them a better deal. Most of these promises are made to the borrower before the new mortgage person has done any qualifying and generally don't pan out. Bottom line is that if you are working with a reputable local mortgage professional that you may have even been referred to, you are probably getting a good deal on your loan. The best defense against these mortgage pirates is to ask them to send you a Good Faith Estimate and a letter guarantying the interest rate and closing costs won't change at the closing. Odds of any of these "phone room wonder boys" complying with that request are slim to none and you can get them off your phone and finish your dinner.
This whole thing really makes me mad but it should make you even more mad. In this age of privacy how is it that the credit bureaus can sell my name, credit score, loan amount, total consumer debt and other factors to any mortgage company with a ton of money.(one such marketing company charges $25,000/month for access to these leads) How is it that this information that we all thought was private is readily available to anyone to purchase? What is worse is the quality and caliber of the people who are calling us armed with this personal and private info. Using tactics like telling you your loan docs are ready, or they can beat any deal you have seen, before they have even qualified you, these mostly young kids, most of whom have never owned a home or much else for that matter, are desperately trying to close your loan as fast as they can before you figure out what is really going on. Generally these sweat shops or mortgage phone rooms are simply dialing for dollars hoping to stumble onto the one or two borrowers referred to in the famous quote, "there's a sucker born every minute".
Sadly much of the sub prime mortgage industry is based on that phrase but the fact remains that the credit bureaus are making it even easier to exploit that point by giving unscrupulous characters enough private information about us to make it seem as if they are the company we are working with. Fortunately for mortgage professionals who get most of their business from repeat clients and referrals, this ploy rarely results in the loss of a client, but it does non-the-less bring even more confusion to an already complex process.
I'm lucky, as far as I know, I haven't lost a client yet to one of these mortgage pirates but what concerns me is the increasing speed at which the calls start and the increasing number of calls. I almost feel bad for the sucker mortgage companies who are buying these leads. If they knew how many other mortgage pirates were also sold the same lead, they may be inclined to build a business around delivering on their promise and fostering long term relationships. Imagine that!
Wednesday, March 21, 2007
Mortgage Times are a changing!
Oh the difference a few months can make. I am currently sitting with 3 loans on my desk that only 3 months ago would have been closed and funded in two weeks or less. Today I'm not sure if I will be able to find any lender who will take them. Here is a couple examples of what I'm talking about;
One borrower has a 615 middle credit score, which is not very good but could be worse. They have a good job and make decent money and they have never been late on their mortgage which they have had for about 17 months. They called me to see about refinancing to 100% and taking some cash out to make some improvements on the home. In the old days (3 months ago) anyone with a credit score of 580 a good job and income could get 100% financing, with cash out, in a heart beat. Today after exhausting 11 lender resources, I finally had to call the client and tell them that the best I could do was going to be 95% and the interest rate was going to be almost insulting. Fortunately this client is not desperate for cash and can afford to wait a month or two until their credit score goes up to 620 points, they new floor for 100% financing.
Another borrower I have been struggling with has a 649 credit score but is self employed and has had 1 mortgage late in the past 12 months. We are able to use bank statements as proof of income so this loan is treated as "full doc" which means it gets the same consideration as someone who has a full time w-2 job. In the old days most of the 75 lenders I have access to would have taken this loan without hesitation, but in this new world, this loan has been accepted but then "kicked to the curb" twice. The borrower is a little frustrated and I can't blame them. Trouble for mortgage officers in today's market is that compared with this borrowers last experience, I look like I'm incompetent. What looked like an easy loan 60 days ago has turned into another mortgage nightmare for both the client and me. Originally the client wanted a 100% refinance with cash out, we are down to our last lender who will even consider it at 95% which leaves the borrower far less cash then they really want. We will get the loan done but it has not been a pleasant experience for any one involved.
This interim period that we are in now, between when things were easy for everyone and the new way where the few sub prime lenders that are left are seriously tightening their belts, is awkward to say the least. Those of us in the mortgage business have to learn to look at each loan application with more discretion as we navigate the new and ever changing guidelines that will seriously change the home finance landscape over the next few months.
Hopefully everyone can hang on for the ride.
One borrower has a 615 middle credit score, which is not very good but could be worse. They have a good job and make decent money and they have never been late on their mortgage which they have had for about 17 months. They called me to see about refinancing to 100% and taking some cash out to make some improvements on the home. In the old days (3 months ago) anyone with a credit score of 580 a good job and income could get 100% financing, with cash out, in a heart beat. Today after exhausting 11 lender resources, I finally had to call the client and tell them that the best I could do was going to be 95% and the interest rate was going to be almost insulting. Fortunately this client is not desperate for cash and can afford to wait a month or two until their credit score goes up to 620 points, they new floor for 100% financing.
Another borrower I have been struggling with has a 649 credit score but is self employed and has had 1 mortgage late in the past 12 months. We are able to use bank statements as proof of income so this loan is treated as "full doc" which means it gets the same consideration as someone who has a full time w-2 job. In the old days most of the 75 lenders I have access to would have taken this loan without hesitation, but in this new world, this loan has been accepted but then "kicked to the curb" twice. The borrower is a little frustrated and I can't blame them. Trouble for mortgage officers in today's market is that compared with this borrowers last experience, I look like I'm incompetent. What looked like an easy loan 60 days ago has turned into another mortgage nightmare for both the client and me. Originally the client wanted a 100% refinance with cash out, we are down to our last lender who will even consider it at 95% which leaves the borrower far less cash then they really want. We will get the loan done but it has not been a pleasant experience for any one involved.
This interim period that we are in now, between when things were easy for everyone and the new way where the few sub prime lenders that are left are seriously tightening their belts, is awkward to say the least. Those of us in the mortgage business have to learn to look at each loan application with more discretion as we navigate the new and ever changing guidelines that will seriously change the home finance landscape over the next few months.
Hopefully everyone can hang on for the ride.
Wednesday, March 14, 2007
Subprime Lenders are Dropping Like Flies
In case you haven't been watching the markets last week and yesterday, major sub-prime lenders are suffering and dying at an alarming rate of speed. D1, a subsidiary of HSBC reported writing off $10.6 billion in bad sub-prime loans in 2006. New Century, which is one of the top 5 sub-prime lenders in the country is rumored to be closing today, and Fremont Investment, another big sub-prime lender announced it was closing it's door yesterday. In addition, there have been many smaller sub-prime lenders that served the market with useful niche products who have also already gone out of business in the past few weeks. What does it all mean?
Well, all the federal and state government efforts to "fix" the mortgage industry may be a big waste of time as the industry is in the process of self correcting through market forces, imagine that. It is starting to look like the big problems that our wise government was blaming on unscrupulous mortgage loan officers was as much or more of an issue with overzealous lenders who were desperate to keep showing higher revenues and profits, and had to turn to more and more risky products to do that because all the "A" borrowers had already been taken care of when mortgage interest rates dropped over the past few years.
Secondly, if you think the foreclosure rate is high now, fasten your seat belts! One of my best sub-prime lenders and also one of the top 5 lenders in the country told me yesterday that it is going to be almost impossible to find 100% financing for the sub-prime borrowers. What this means is that as all the sub-prime 2 year ARMs come due and threaten to adjust UP roughly 2% points, seriously crushing the cash-flow of these home owners, they will have nowhere to go. Over the past 5 years these people were able to do a cash-out refinance to lower or at least keep their interest rate and payment the same while they tried to get their spending behavior under control and improve their credit scores so they could come back to the market and finally qualify for the coveted "A" paper 30 year fixed mortgage. With lenders closing out the 100% and 80/20 loans, and with home prices being flat or declining in most markets, all these sub-pime home owners will have no where to go but get second jobs or walk away, as in many cases they owe more than their home is worth.
When the dust settles, there will be far fewer sub-prime lenders with far fewer programs that will be much less risky for the investors and those who qualify to purchase a home in this "NEW MARKET" will actually be able to make their monthly payments in a timely manner. Go figure!
Does anyone want to go tell the people in government before they spend millions of dollars fixing a problem that will be mostly self corrected by the end of March?
Well, all the federal and state government efforts to "fix" the mortgage industry may be a big waste of time as the industry is in the process of self correcting through market forces, imagine that. It is starting to look like the big problems that our wise government was blaming on unscrupulous mortgage loan officers was as much or more of an issue with overzealous lenders who were desperate to keep showing higher revenues and profits, and had to turn to more and more risky products to do that because all the "A" borrowers had already been taken care of when mortgage interest rates dropped over the past few years.
Secondly, if you think the foreclosure rate is high now, fasten your seat belts! One of my best sub-prime lenders and also one of the top 5 lenders in the country told me yesterday that it is going to be almost impossible to find 100% financing for the sub-prime borrowers. What this means is that as all the sub-prime 2 year ARMs come due and threaten to adjust UP roughly 2% points, seriously crushing the cash-flow of these home owners, they will have nowhere to go. Over the past 5 years these people were able to do a cash-out refinance to lower or at least keep their interest rate and payment the same while they tried to get their spending behavior under control and improve their credit scores so they could come back to the market and finally qualify for the coveted "A" paper 30 year fixed mortgage. With lenders closing out the 100% and 80/20 loans, and with home prices being flat or declining in most markets, all these sub-pime home owners will have no where to go but get second jobs or walk away, as in many cases they owe more than their home is worth.
When the dust settles, there will be far fewer sub-prime lenders with far fewer programs that will be much less risky for the investors and those who qualify to purchase a home in this "NEW MARKET" will actually be able to make their monthly payments in a timely manner. Go figure!
Does anyone want to go tell the people in government before they spend millions of dollars fixing a problem that will be mostly self corrected by the end of March?
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