Do you think your property tax bill will be too high?
Don't pay it without knowing it's right!
Start your tax appeal process now!
This past April began an annual process by the County's Property Tax Assessor's office to assess your property for the 2008 tax year right now and will mail out your tax bill beginning July 1, 2008. Your property taxes may be assessed too high and we can help you find out for sure.
If you plan to appeal your assessment, the assessment appeal filing period runs from July 2 thru September 15, 2008. You will want to have supporting comparable property sales data to include in your appeal. An accurate, objective appraisal will help you get your tax rate adjusted and that's where we come in.
Call us today and we can get started before your tax is due. We can be reached at 213-700-1968 or email the Mortgage Pro! at ldwalls@go2themortgagepro.com
The following article appeared in Inman News and given the current market conditions I thought it appropriate to post it here in my blog.
Today's Top Real Estate NewsProvided by Inman News FeaturesMay 30, 2008 02:23 AM
Despite deed in lieu of foreclosure, worst not over
For homeowners with PMI, expect to cover insurer's loss May 30, 2008 02:23 AM By Ilyce Glink Co-written by Samuel J. TamkinInman News Q: I had a loan that was greater than 80 percent of the value of my home. My loan required me to purchase private mortgage insurance (PMI). But I recently had to do a deed in lieu of foreclosure because I could no longer afford the increases in the adjustable-rate mortgage. Now the PMI company has come after me for the $43,000 it paid the lender due to the deed in lieu. Is the PMI company allowed to subrogate and go after me for its loss? Isn't the reason you buy premiums for this coverage and insurance is a calculated risk on their part, so that I wouldn't have to pay? A: Your question is quite right on target, given the current turmoil in the housing market. If you obtained a loan and that loan was greater than 80 percent of the value of the home, your lender would have required you to obtain and pay for private mortgage insurance or PMI. If you obtained two loans when you bought your property, where one loan was for 80 percent of the value of the home and the other was for an additional amount, perhaps another 10 or 15 percent of the purchase price of the home, you would not have had to pay for PMI. During the last several years, the method of choice to buy homes and avoid PMI was to obtain a first mortgage loan for 80 percent of the home's value and any additional money needed was obtained through a home equity line of credit or second mortgage. These loans were often called "piggyback" mortgages. Historically, one lender never would loan more than 80 percent loan to value to any borrower. It was too risky. They wanted to make sure they had a cushion of at least 20 percent equity just in case something went wrong financially with the borrower. If the home went down in value, the borrower would suffer the loss first. Property prices would have to fall more than 20 percent before the lender would be affected. But as housing became more expensive, and saving up a 20 percent down payment became more difficult, borrowers wanted a way to buy a house with less of a down payment. Lenders came up with the concept of having a mortgage insurance company insure the lender for any losses they might sustain for any loans that were greater than the 80 percent loan to value. But the mortgage insurance company needed to get paid for that risk. That payment came in the form of PMI. The more you borrow above the 80 percent mark, the greater the amount you pay in PMI. What most borrowers don't realize is this: PMI is for the lender's benefit only. Your benefit (and the reason you paid the premium) was that without buying a PMI policy, you would not have been able to get a loan to buy the property. Since PMI is for the lender's benefit, if you default on your loan and the property is sold off for less than the loan amount but greater than the original loan-to-value ratio -- even if it's a deed in lieu -- your lender gets paid money from the PMI company. The PMI company is on the hook to your lender for the difference between the 80 percent mark and the amount you borrowed. When you presented the lender with the deed in lieu, you effectively said to the lender, "Here are the keys to my property; take the keys and let me out of my loan." When the lender accepted the keys, it became the owner of the property. The key question is whether the lender agreed to forgive the balance of the loan. If the lender agreed to forgive the balance of the loan, the PMI company should not have the right to come after you. You used the term "subrogation." That term is generally used in the context of insurance claims. If you have a claim against somebody and your insurance company makes you whole, your insurance company would have your rights under that claim to recover the payment they made to you. In your case, the lender lost out and the PMI company paid the lender money. The PMI company is now coming to you and is trying to recoup its loss. That might work unless the lender agreed to the deed in lieu and forgave the balance of the debt you owe. If you don't owe the lender any money, you shouldn't owe the PMI company any money either. However, if you simply gave the keys to the lender and the lender didn't have to go through the foreclosure process to get the title to the home, the lender would still have the right to go after you for any amount still owing on the loan. In this instance, the PMI company paid the lender and has the claim that the lender would have had against you. The bottom line, and it is a point widely misunderstood by home buyers, is that the PMI company can go after you for any amount you still owe the lender and it can settle that claim any way it wants. If the PMI company agrees to have you pay it over time, you can agree to a payment schedule. If it agrees to take a lump sum now for substantially less than the $43,000 that you owe, you could agree to that. The PMI company may under certain hardship cases decide to forego some or all of the amount that you may owe. The key to the PMI company's claim is its belief that you have the ability and means to pay up. If you do, it will press to get paid. If you don't have the means to pay and go into bankruptcy, it will stand in line with your other creditors and get paid what it can through the bankruptcy proceeding. *** What's your opinion? Leave your comments below.
May 30, 2008 02:23 AM
By Ilyce Glink Co-written by Samuel J. TamkinInman News
Q: I had a loan that was greater than 80 percent of the value of my home. My loan required me to purchase private mortgage insurance (PMI). But I recently had to do a deed in lieu of foreclosure because I could no longer afford the increases in the adjustable-rate mortgage. Now the PMI company has come after me for the $43,000 it paid the lender due to the deed in lieu. Is the PMI company allowed to subrogate and go after me for its loss? Isn't the reason you buy premiums for this coverage and insurance is a calculated risk on their part, so that I wouldn't have to pay? A: Your question is quite right on target, given the current turmoil in the housing market. If you obtained a loan and that loan was greater than 80 percent of the value of the home, your lender would have required you to obtain and pay for private mortgage insurance or PMI. If you obtained two loans when you bought your property, where one loan was for 80 percent of the value of the home and the other was for an additional amount, perhaps another 10 or 15 percent of the purchase price of the home, you would not have had to pay for PMI. During the last several years, the method of choice to buy homes and avoid PMI was to obtain a first mortgage loan for 80 percent of the home's value and any additional money needed was obtained through a home equity line of credit or second mortgage. These loans were often called "piggyback" mortgages. Historically, one lender never would loan more than 80 percent loan to value to any borrower. It was too risky. They wanted to make sure they had a cushion of at least 20 percent equity just in case something went wrong financially with the borrower. If the home went down in value, the borrower would suffer the loss first. Property prices would have to fall more than 20 percent before the lender would be affected. But as housing became more expensive, and saving up a 20 percent down payment became more difficult, borrowers wanted a way to buy a house with less of a down payment. Lenders came up with the concept of having a mortgage insurance company insure the lender for any losses they might sustain for any loans that were greater than the 80 percent loan to value. But the mortgage insurance company needed to get paid for that risk. That payment came in the form of PMI. The more you borrow above the 80 percent mark, the greater the amount you pay in PMI. What most borrowers don't realize is this: PMI is for the lender's benefit only. Your benefit (and the reason you paid the premium) was that without buying a PMI policy, you would not have been able to get a loan to buy the property. Since PMI is for the lender's benefit, if you default on your loan and the property is sold off for less than the loan amount but greater than the original loan-to-value ratio -- even if it's a deed in lieu -- your lender gets paid money from the PMI company. The PMI company is on the hook to your lender for the difference between the 80 percent mark and the amount you borrowed. When you presented the lender with the deed in lieu, you effectively said to the lender, "Here are the keys to my property; take the keys and let me out of my loan." When the lender accepted the keys, it became the owner of the property. The key question is whether the lender agreed to forgive the balance of the loan. If the lender agreed to forgive the balance of the loan, the PMI company should not have the right to come after you. You used the term "subrogation." That term is generally used in the context of insurance claims. If you have a claim against somebody and your insurance company makes you whole, your insurance company would have your rights under that claim to recover the payment they made to you. In your case, the lender lost out and the PMI company paid the lender money. The PMI company is now coming to you and is trying to recoup its loss. That might work unless the lender agreed to the deed in lieu and forgave the balance of the debt you owe. If you don't owe the lender any money, you shouldn't owe the PMI company any money either. However, if you simply gave the keys to the lender and the lender didn't have to go through the foreclosure process to get the title to the home, the lender would still have the right to go after you for any amount still owing on the loan. In this instance, the PMI company paid the lender and has the claim that the lender would have had against you. The bottom line, and it is a point widely misunderstood by home buyers, is that the PMI company can go after you for any amount you still owe the lender and it can settle that claim any way it wants. If the PMI company agrees to have you pay it over time, you can agree to a payment schedule. If it agrees to take a lump sum now for substantially less than the $43,000 that you owe, you could agree to that. The PMI company may under certain hardship cases decide to forego some or all of the amount that you may owe. The key to the PMI company's claim is its belief that you have the ability and means to pay up. If you do, it will press to get paid. If you don't have the means to pay and go into bankruptcy, it will stand in line with your other creditors and get paid what it can through the bankruptcy proceeding. *** What's your opinion? Leave your comments below.
Q: I had a loan that was greater than 80 percent of the value of my home. My loan required me to purchase private mortgage insurance (PMI).
But I recently had to do a deed in lieu of foreclosure because I could no longer afford the increases in the adjustable-rate mortgage. Now the PMI company has come after me for the $43,000 it paid the lender due to the deed in lieu.
Is the PMI company allowed to subrogate and go after me for its loss? Isn't the reason you buy premiums for this coverage and insurance is a calculated risk on their part, so that I wouldn't have to pay?
A: Your question is quite right on target, given the current turmoil in the housing market.
If you obtained a loan and that loan was greater than 80 percent of the value of the home, your lender would have required you to obtain and pay for private mortgage insurance or PMI.
If you obtained two loans when you bought your property, where one loan was for 80 percent of the value of the home and the other was for an additional amount, perhaps another 10 or 15 percent of the purchase price of the home, you would not have had to pay for PMI.
During the last several years, the method of choice to buy homes and avoid PMI was to obtain a first mortgage loan for 80 percent of the home's value and any additional money needed was obtained through a home equity line of credit or second mortgage. These loans were often called "piggyback" mortgages.
Historically, one lender never would loan more than 80 percent loan to value to any borrower. It was too risky. They wanted to make sure they had a cushion of at least 20 percent equity just in case something went wrong financially with the borrower. If the home went down in value, the borrower would suffer the loss first. Property prices would have to fall more than 20 percent before the lender would be affected.
But as housing became more expensive, and saving up a 20 percent down payment became more difficult, borrowers wanted a way to buy a house with less of a down payment. Lenders came up with the concept of having a mortgage insurance company insure the lender for any losses they might sustain for any loans that were greater than the 80 percent loan to value.
But the mortgage insurance company needed to get paid for that risk. That payment came in the form of PMI. The more you borrow above the 80 percent mark, the greater the amount you pay in PMI.
What most borrowers don't realize is this: PMI is for the lender's benefit only. Your benefit (and the reason you paid the premium) was that without buying a PMI policy, you would not have been able to get a loan to buy the property.
Since PMI is for the lender's benefit, if you default on your loan and the property is sold off for less than the loan amount but greater than the original loan-to-value ratio -- even if it's a deed in lieu -- your lender gets paid money from the PMI company. The PMI company is on the hook to your lender for the difference between the 80 percent mark and the amount you borrowed.
When you presented the lender with the deed in lieu, you effectively said to the lender, "Here are the keys to my property; take the keys and let me out of my loan." When the lender accepted the keys, it became the owner of the property.
The key question is whether the lender agreed to forgive the balance of the loan. If the lender agreed to forgive the balance of the loan, the PMI company should not have the right to come after you.
You used the term "subrogation." That term is generally used in the context of insurance claims. If you have a claim against somebody and your insurance company makes you whole, your insurance company would have your rights under that claim to recover the payment they made to you.
In your case, the lender lost out and the PMI company paid the lender money. The PMI company is now coming to you and is trying to recoup its loss.
That might work unless the lender agreed to the deed in lieu and forgave the balance of the debt you owe. If you don't owe the lender any money, you shouldn't owe the PMI company any money either.
However, if you simply gave the keys to the lender and the lender didn't have to go through the foreclosure process to get the title to the home, the lender would still have the right to go after you for any amount still owing on the loan. In this instance, the PMI company paid the lender and has the claim that the lender would have had against you.
The bottom line, and it is a point widely misunderstood by home buyers, is that the PMI company can go after you for any amount you still owe the lender and it can settle that claim any way it wants. If the PMI company agrees to have you pay it over time, you can agree to a payment schedule. If it agrees to take a lump sum now for substantially less than the $43,000 that you owe, you could agree to that. The PMI company may under certain hardship cases decide to forego some or all of the amount that you may owe.
The key to the PMI company's claim is its belief that you have the ability and means to pay up. If you do, it will press to get paid. If you don't have the means to pay and go into bankruptcy, it will stand in line with your other creditors and get paid what it can through the bankruptcy proceeding.
***
What's your opinion? Leave your comments below.
Federal Housing Administration - U.S. Department of Housing and Urban Development
This past week I attended a seminar at the Consolidated Realty Board in Los Angeles where I had the pleasure of meeting and having lunch with the guest speaker Sandra L. Smith, Senior Single Family Housing Specialist for FHA out of the Santa Ana Homeownership Center Processing & Underwriting Division. Sandra has over 20 years with the agency and conducts seminars teaching Realtors, Realtists and Brokers as well as lenders the guidelines and requirements of FHA insured loans. In two weeks she will be in Arizona conducting a seminar geared specifically to lenders and lecturing on underwriting guidelines for FHA loans.
Sandra presented and spoke on many subjects. The following is a summary of that training session:
WHAT ARE THE ADVANTAGES TO THE INDUSTRY OF AN FHA LOAN?
FHA offers loan down payment options, eligibility with less than perfect credit, a loan at a reasonable cost, and help if there is ever trouble making the mortgage payment. Because an FHA mortgage insures the lender against loss, an FHA mortgage typically has an interest rate that is competitive with the best in the market.
· The Borrower’s entire cash investment – as little as 3% - can be gifted by family members, employers, charitable organizations or local government entities.
· The seller can contribute up to 6% of the home’s price toward closing costs through a seller’s concessions.
· 100% insurance should the borrower fail to meet mortgage obligations.
· FHA offers a standard 1 year adjustable rate mortgage (ARM) as well as 3, 5, 7 and 10 year ARM options.
· FHA Streamline refinance loans offer an easy, non-credit qualifying way for borrowers with FHA-insured loans to take advantage of lower interest rates.
· The FHA Streamline K program allows homebuyers to finance home improvement costs up to $35,000.
· FHA’s Home Equity Conversion Mortgage allows senior borrowers to turn equity into cash.
· Minimum credit scores are not required. FHA allows use of non-traditional credit history to qualify borrowers (such as a cell phone bill or an electric bill).
· U.S. Citizenship is not required but, for those who are not citizens, they must be lawful permanent or non-permanent resident aliens with a valid Social Security Number.
Recent changes make FHA even more competitive in today’s complex mortgage market.
· FHA adopted the industry appraisal standards permitting the use of the Fannie Mae appraisal forms with no additional documentation – no valuation conditions form or Homebuyer Summary.
· FHA has eliminated unnecessary requirements to make minor repairs.
· The homebuyer and seller, individually or jointly, can pay closing costs as agreed to in the sales contract. FHA no longer limits what closing costs the homeowner is permitted to pay.
· To Provide expanded alternatives to homeowners wishing to refinance, FHA will insure a cash-out refinance up to 95% of the appraiser’s estimate of value.
For more information on FHA programs and services – Contact The Mortgage Pro! by telephone at 213-700-1968.
L. D. Walls, The Mortgage Pro!
Mortgage Broker, Commercial Lender, Planner & Trusted Adviser, C.L.O., CalPERS
FHA Loans Grow Costy - Banks Adding Fees
On Tuesday March 5, 2008, FHA, Fanny Mae (FNMA), Freddie Mac and the Federal Home Loan Mortgage Corporation (FHLMC) announced a temporary increase in the maximum loan limits for single family homes and up to and including 2 to 4 unit homes. (Please read my prior Blog Post "New Maximum FHA Loan Limits Set to Benefit Home Owners & Buyers!!!" March 9th, 2008 2:14 AM)
"Many families all over the U.S. will benefit from this access to credit, and increasing these loan limits will inject much-needed liquidity into the housing market," said FHA Commissioner/Assistant Secretary for Housing Brian Montgomery. "Even moderate-cost areas like those in the South and Southwest such as Dallas, Houston, Augusta and Tallahassee will be helped..."
Well, I bet Brian Montgomery didn't intend nor see lenders adding fees to FHA loans.
As it turns out, that while politicians have gotten the Federal Housing Administration to help the nation and revive the slumping housing market by enabling many more people to obtain or refinance home loans through government insured loans, they did not anticipate lenders making it more difficult for those same homeowners or new buyers to qualify for these loans.
Banks that make loans insured by the federal agency are adding fees and restrictions that make those loans more costly and less widely available. Even though these new higher loan limits are currently under way, they are due to expire at year end, but pending legislation is likely to authorize a permanent increase in the eligibility ceiling but no one knows what those limits are going to be. There is speculation that they will not be as high in so called "High Cost Areas."
The demand for FHA loans has increased dramatically as other types of mortgages have become more expensive and harder to obtain.
• The Goal: Congress wants the FHA to help more borrowers get home loans and prop up the housing market.
• The Hitch: Lenders are adding fees and restrictions on FHA loans that will shut some borrowers out of the market.
• The Background: Mounting defaults have made lenders wary.
One example is J.P. Morgan Chase & Co. Their Home-Mortgage Unit this past week informed lenders that sell loans to the big bank that it will require "price adjustments" on the new, larger variety of FHA loans. The adjustments will add about half a percentage point to the interest rate on those loans.
It seems other big lenders appear to be making price adjustments roughly in line with those announced by Chase. I found this week, with some of the large lenders that have approved The Mortgage Pro, that I can offer a rate of about 6.375% with no fees or "points" paid to reduce the interest rate on the new "jumbo" FHA loans, compared with about 5.875% on smaller FHA loans.
Other mortgage brokers I know have been quoted rates of nearly 7% on jumbo FHA loans. The loans are so expensive they aren't going to sell. If this trend continues it's going to be a waste of everybody's time.
I routinely trade the stock market. Some of my trading friends say that in all likelihood the higher rates largely reflect muted demand from investors for securities backed by jumbo FHA loans. Those securities are expected to be less actively traded than ones backed by smaller FHA loans, and the larger loans may be apt to refinance faster, reducing the value to investors.
Meanwhile, many banks also are requiring minimum credit scores for borrowers seeking FHA loans. The FHA doesn't set a minimum, but many lenders recently have begun requiring scores of at least 580 on the standard scale of 300 to 850.
That is shutting out some people who otherwise would qualify for an FHA loan.
At a time when Congress wants the FHA to provide more help to the mortgage market now we have the industry making their efforts moot.
As I have stated in the past, I am so impressed with my website developers because they are constantly assisting me in providing tools for my clients and the general public who take the time and opportunity to review all the important data here on my site.
A very powerful tool newly implimented is the ability to CHAT LIVE with you when you visit my site. Below my picture on the left is where you will find the CHAT BOX link. Recently, a first time buyer visited my site and accepted my invitation to chat. The "You said" person is me speaking to the Guest.
Here is that conversation:
XSites Desktop said:
The website visitor has accepted your chat invitation.
Guest said:
Hello?
You said:
Thank you for visiting my website... Is there anything that you wish to ask?
yes, I am a fist time home buyer... I was talking to a realtor and was going to make an offer... they tried to talk me out of making an offer that was lower than the listed price. That disturbed me. Why did they want me to make a higher offer?
Realtors are commissioned sales people. I often say that if you want to know where truth lies... always follow the money.
Don't get me wrong, there are highly reputable realtors out there but the truth and the law IS that a realtor MUST always present an offer to a seller no matter how ridiculous they think it is.
So that realtor, although they spoke of bringing in an equal or higher offer or perhaps an offer that the realtor thinks was appropriate is, in my opinion, NOT acting in conjunction with the spirit of the law nor in your interest.
But let me ask you this, was this realtor your realtor as a buyer’s agent or was this realtor representing the seller alone?
Well, I think she was representing me. After all I found her and she found the property I was interested in.
OK, good. The reason I asked is because if the agent was representing both you and the seller then they are acting in the capacity of a DUAL AGENT. Dual agency is permitted by law provided that the agent informs both parties that he/she is acting in the capacity as dual agent. In other words, full disclosure of the agents intentions to represent both you and the seller MUST be made known to each of you.
However, here is the problem and I will present the case and then ask you what you prefer...
A listing agent, one who represents the seller, has the highest duty of trust, loyalty, care and fair dealing, etc. with the seller. That means that HIS charge is to get the seller everything he wants, i.e., his highest selling price with no concessions.
Now, in his capacity to represent you as a BUYERS AGENT, he has the same duties toward you at law.
Here is what the agent knows... that agent knows the highest price the seller wants and so do you; it’s the listed price. That agent, more importantly knows, the least amount the seller is willing to sell for.
Now, in the agent’s capacity as dual agent representing you, the problem is that while law allows dual agency, it is impossible ethically to do so because he is commissioned and one may presume that one is ALWAYS interested in the highest possible personal gain for themselves.
If that "rebuttable" presumption holds it means that the agent is in an untenable position as against your interest as a buyer. Why? You want to buy that home for as little as possible and for the greatest concessions that you can negotiate. The agent knows that. However, his greatest commission will be based on the higher selling price even as he knows what you qualify for, is willing to pay or can pay and measures that against what he knows of the sellers willingness to sell. Admittedly, the arguement I am making is over simplified but neverthe less significant.
It seems to me then that since the law prescribes his highest duty is to his seller that he, in fact, has a dilemma. But in truth the dilemma is YOURS not his because he already knows who has his greatest loyalty and higest duty... the seller! NOT YOU!
Now here is my question to you... Knowing what I just said, would you ever agree to a dual agency?
NO!
Well thank you Mortgage Pro! I can see why they call you a PRO! I appreciate your time... Thank you very much! I guess I have a lot to learn about all this. :(
You are quite welcome and let me thank you for your question! You are, as a first time buyer, very bright to start the process of buying a home by asking a lot of serious questions. THAT WAS A VERY SERIOUS QUESTION! I want you to recognize something... Some how, some way, you felt uncomfortable with this agent. Let that uneasy feeling guide you, when ever it occurs, in everything you do! If it does not "FEEL" right, ask more questions. "SOMEONE" is trying to guide you by making you "feel" something is not right. Learn to follow that caution and you will usually find later - why that feeling kept you from making the wrong decision.
If I may be of service to you in the future please return to my site. I will be happy to assist you and in fact why not call me directly? My number is right here at the bottom of the webpage you are on. Also, please take the time to review my site. There is much here to learn and I can assure you that if you go through my site, as a first time buyer, you will come away armed with significant information that will educate you and make you a more savvy investor.
Again thank you and please give me a call. I will personally take the time to help you.
Thank you Mortgage Pro! You have been very helpful and I will take your advice and spend some time on the site.
Great, one last thing and I will not disturb your time on my site?
You no doubt know about adjustable rate mortgages or have heard about them.
I would encourage you to read the link on the left called ARMS EXPLAINED. It is perhaps boring but extremely informative. You will learn what many do NOT understand about these types of loans. Then, visit the link INDEX ANALYZER PRO! If you have any questions I will be here. Thank you!
OK thank you again
This is a buyer well on her way to becoming a savvier consumer of financial products! I feel everyone should ask a lot of questions when entering any decision making process especially one as serious and far reaching as investing in a home.
Warmest Regards,
The Mortgage Pro!
Update
Highlights –
The following selection has been obtained from the statistical release H-15 with a release date of March 17 , 2008, which represents the yield on actively traded issues adjusted to constant maturities. The complete release can be found at www.federalreserve.gov/releases/h15/.
March 14, 2008
The above yields on Treasury securities may be used to help determine whether a specific loan is subject to the "high-rate, high-fee" rules under section 226.32 of Regulation Z, implementing the Home Ownership and Equity Protection Act (HOEPA) and under state statutes including California Financial Code 4970 et seq., the "covered-loans".
To determine the yield on comparable Treasury securities for the APR test, lenders may use the yield on actively traded issues adjusted to constant maturities published in the Federal Reserve Board's "Selected Interest Rates" (statistical release H-15). They must use the yield corresponding to the constant maturity closest to the loan's maturity. If the loan maturity is exactly halfway between security maturities, the APR on the loan should be compared with the yield for Treasury securities having the lower yield.
For a complete list of rates visit The Federal Reserve Web Site.
The Mortgage Pro! Update
Economic Commentary - Powerful Medicine...
It is obvious that the Federal Reserve Board has pulled out all the stops in dealing with the present credit crisis. In the face of a declining dollar and soaring oil prices, the Fed moved to lower rates again--significantly. It has now moved rates down six times in the past six months, cutting short-term rates by more than 50 percent overall. The Fed has also made hundreds of billions of dollars available so that banks and other financial institutions have access to capital. The Fed is not only trying to lower rates, but restore faith in the financial system. Our guess is that lower rates will help--but more action will be needed.
There is not much else the Fed can do but expect the government to continue to sponsor programs to help, especially in an election year. There is talk of expanding the Federal Housing Administration's refinance program aimed at those who are behind in their payments due to resets of adjustable rate mortgages. Speaking of adjustable rate mortgages, holders of adjustables will benefit the most from the lower short-term rates. Many have not been able to refinance because of lower home values or tighter guidelines by lenders. These adjustables are less likely to adjust upward in the near future and if they adjusted upward last year, they may very well come down at the time of their next adjustment. That could lead to less foreclosures and every little bit of market strength will help the recovery.
The Markets -
Rates fell in the past week, especially fixed rates. Freddie Mac announced that for the week ending March 20, 30-year fixed rates averaged 5.87% down from 6.13% the week before. The average for 15-year fixed fell steeply to 5.27%. The average for one-year adjustables increased slightly to 5.15% and five-year adjustables fell slightly to 5.56%. A year ago 30-year fixed rates were at 6.16%. "Rates fell this week as various actions were taken to improve market liquidity," said Frank Nothaft, Freddie Mac vice president and chief economist. "In addition, the inflation report from the Consumer Price Index (CPI) reflected weaker price increases than consensus expectations. Unchanged in February both including and excluding food and energy costs, it is the first time the core CPI did not report a monthly increase since November 2006. Meanwhile, retail sales fell by 0.6 percent in February, contrary to the consensus forecast of a 0.2 percent increase, signaling that the condition of the economy might be weaker than previously thought. Slowing consumer spending and weak employment conditions are among the concerns behind the Fed's decision to lower the target federal funds rate by 0.75 percentage points in the most recent Federal Open Market Committee meeting."
For current Indices for Adjustable Rate Mortgages go to Today's Market Update.
Additionally, use one of the most powerful tools we offer at The Mortgage Pro! to view the various indecies that adjustables may be tied to. Get a historical perspective, over time, to see which index type is the least volitile which should help you in determining which you prefer your loan to be tied to. Please go to Index Analyzer Pro! Use the verticle and horizontal slide controls on the page to bring the historical timeframe into view. Note that you may select and de-select each index and see how it plots on the graph. Once you have selected all the data you want to see, simply email it to yourself using the Email Report button.
Blog The Pro! -
You have been talking about more prospects needing help with their credit because of lenders tightening up. You are right--half the people I speak to don't qualify anymore. But I have had bad luck with credit firms. Some are charging a small fee and others are charging over $1,000 up front. How can I make sure I am dealing with a reputable company and what is your feeling about paying a large sum up-front for the service? Many of these prospects have credit issues because they don't have that type of money. Monica from So. California
With regard to selecting the right firm, my advice is the same for any service you select. Check references. There are a lot of complaints in this industry and those who don't do their due diligence are more likely to get burned. With regard to large up-front fees, obviously you have a catch-22 because most prospects with bad credit can't afford the large fees. That is why so many loan officers wind up doing the repair themselves--a very unprofitable use of their time. But even if they could afford the fees, I would not recommend this route. I believe in a smaller monthly fee for credit work for two reasons. First, if the company does not perform, there is not much lost. If you are charging a small monthly fee, you must perform or lose your clients. Secondly, a monthly service means that you not only can address their short-term credit situation, but can also optimize scores for the long-run. With our financial crisis it is clear that clients need to optimize their scores in the long-run otherwise they will pay hundreds of thousands of dollars extra over their lifetime--not only in mortgage interest but for credit cards and even insurance. What we do in our industry is apply "bandaids"--fixing scores and then having clients come back two years later with lower scores and starting over again. We need to help clients in the long-run as well as the short-run. This Thursday Brian House, Lead Instructor with CreditTRAX at FDI is going to be hosting a special webinar. You can register for this FDI Opportunity Webinar at https://www1.gotomeeting.com/register/591443609
Blog The Pro! is an exclusive feature of go2themortgagepro.com. If you have a question on finance, sales, marketing or leadership you would like to ask, email me at ldwalls@go2themortgagepro.com.
Industry News -
Lease-to-own agreements can help sell a hard-to-sell property during a sluggish housing market. Here’s how they work. A seller agrees to rent a property to an interested buyer for a set period of time, usually one to three years. At the end of the lease, the buyer has the option to purchase the home at a preset price. A portion of the monthly rent paid during the lease is usually counted toward the down payment. To cover that, the seller charges a rent increment or monthly premium of $200 to $300 compared to comparable rentals. Many owners also charge an option fee for taking the property off the market, usually 1 percent to 2 percent of the sale price. This may be applied toward the purchase. Sellers have no guarantee that renters will buy at the end of the term, but if they don’t, they keep the option fee and the amount of the rent that would have gone toward the down payment. Source: Orlando Sentinel
The Hope Now Alliance, a coalition of 28 lenders and loan servicers supported by the Bush administration, has mailed more than 1 million letters since December to borrowers with subprime adjustable-rate mortgages, offering a solution. The response rate has been less than 20 percent. Why have borrowers been so reluctant to step forward? "Their collections departments have beat (delinquent home owners) over the head for months. It's no wonder borrowers won't answer the phone," says Todd Buckner, CEO of National Housing Solutions, a for-profit mediator between borrowers and lenders. Finding a solution also isn’t as easy as some politicians and lenders make it sound. For instance, the FHA has created FHASecure to help subprime borrowers refinance out of risky ARMs. Since the program was announced in fall, the FHA has received about 277,000 applications and approved fewer than half of them. And there are borrowers who are not willing to bend. Lender Martin Goodman, president of Residential Capital, says, “There's a sense of entitlement (among home owners) that is just unbelievable." Source: Associated Press
Treasury Secretary Henry Paulson continues to dismiss calls for helping borrowers with "underwater" mortgages through principal reductions that are being advocated by some federal banking regulators. It's not the "government's job" to help borrowers who would walk away from their homes because the properties' values have dropped and they don't want to pay the mortgage, Secretary Paulson told the American Bankers Association. The Treasury secretary played an important role in getting mortgage servicers to join the Hope Now alliance, which is focused on helping struggling homeowners who want to stay in their homes but can't afford their mortgage payment because of a change in their ability to pay or the reset of an adjustable-rate mortgage. He stressed that it is important for the Hope Now servicers to publicly disclose the results of their workout efforts so that everyone can see whether the servicers are following through on the commitments. "I won't look kindly on free riders," Mr. Paulson said. Federal Reserve Board Chairman Ben S. Bernanke called on lenders to make permanent reductions in the principal amount of a mortgage to help troubled borrowers stay in their homes or refinance into a Federal Housing Administration-insured mortgage. Source: National Mortgage News
Commercial real estate market fundamentals are fairly stable, although investment is waning following a record year in 2007, according to the latest Commercial Real Estate Outlook of the National Association of Realtors. NAR Chief Economist Lawrence Yun says the commercial real estate market is holding essentially even. “We’re seeing no significant changes in vacancy rates or rent growth, so the fundamentals in commercial real estate still seem to be respectable,” he says. “Under normal circumstances, near-full occupancy coupled with positive rent growth would be of strong interest to investors, but we’re not seeing that. The credit crunch has filtered into the commercial real estate market.” Patricia Nooney of St. Louis, chair of the Realtors Commercial Alliance Committee, said the investment cycle appears to be turning. “It looks like investors are taking a wait-and-see attitude,” she says. “Even wit h fairly stable fundamentals and capital available from institutional investors, it appears investor confidence has declined, and some private investors have had problems obtaining financing. Commercial real estate investment set a new record in 2007, but now that we’re in a period of economic uncertainty, transaction volume is likely to decline.” Source: National Association of Realtors
The federal budget deficit for the first five months of this fiscal year has risen more than 60% from the prior year after ballooning by more than expected in February, the Treasury Department said Wednesday. In its monthly finance review, the Treasury Department said the budget deficit totaled $263.3 billion for the fiscal year that began Oct. 1, up from $162.2 billion reported in the same period a year earlier. The deficit for the month of February reached $175.6 billion. A consensus of analysts polled by Briefing.com expected a budget deficit for the month of $170 billion. Thus far, government spending has risen 10.2% to $1.2 trillion compared to the previous year, while revenue has risen only 1.3% to $967.2 billion. "In the short run, given the economy is weak, budget deficit is probably a good thing because that means the government is spending money to stimulate the economy," said Gus Faucher, an economist with M oody's Economy.com. Faucher said that we still have yet to see the affect of the government's economic package. The government projected that the budget deficit for all of fiscal 2008, which includes the economic package spending, will total $410 billion, unchanged from last month's estimate, and near 2004's record high of $413 billion. Source: CNN/Money
House Financial Services Committee Chairman Barney Frank, D-Mass., is proposing to provide up to $300 billion in Federal Housing Administration guarantees to refinance at-risk or delinquent homeowners into affordable FHA-insured mortgages. According to an outline of the bill Rep. Frank is circulating for input, investors would be required to write down the principal to 85% of the appraised value of the property and extinguish all existing liens. In addition, the borrower would have to make six timely mortgage payments before the restructured loan could qualify for an FHA guarantee. The FHA housing stabilization bill could refinance 1 million to 2 million borrowers, and the existing lender/mortgage holders will receive a cash payment and have no further credit exposure, a