The Making Homes Affordable Program that went into affect some time ago is finally starting to make a difference. With the recent press reports about the big banks and mortgage servicers not doing much with all the money they received from TARP to help distressed home owners, they have (finally) started doing actual long term Note modifications.
This program, which started almost a year ago, has now enrolled some one million borrowers into it. I should note that temporary modifications are in this total, but at least now there are some permanent modifications being granted. This number is still only about 30% of the target 4 million borrowers that may be enrolled by the end of 2012.
The idea of the program is to help homeowners in trouble get a loan payment that is about 31% of their true (family) gross income.
One reason they are not doing more is that most lenders say you have to be 60 days behind before they can get help. Not true! You may have to take a temporary modification as first step, but they can do something before you get behind with missed payments.
That said, if you are in need of a home loan modification call your loan servicer (who you make your payment to) and tell them you need help. Be polite but persistent.
You will have to provide detailed income and asset information but in the long run, it can save you thousands in monthly payment late fee’s and bad credit ratings.
Friday, March 26, 2010
Monday, February 15, 2010
NEW RULES TO HELP THE CONSUMER UNDERSTAND HOME LOAN COSTS
There have been major changes to the Good Faith Estimate (GFE) which has been the key shopping tool for our industry for the past 35 years. The GFE has been the road map lenders used to estimate the charges associated with a new home mortgage loan. Like a roadmap, the GFE was an intended path but many times took unintended detours.
Scrupulous loan offices and lenders would keep an open dialog so borrowers would know of changes in fees, programs, or any other component of the loan a “detour” on their part would cause. Unscrupulous lenders would misguide or detour borrowers so they could add junk fees or arbitrarily increase an original fee to help them make more money. This was the result of much of the deregulation that took place in the early and mid 90’s. History tells us that economic freefall is preceded by deregulation and then followed by a period of much increased regulation. As if the first of this year, our country entered the later.
The new Real Estate Settlement Procedures Act (RESPA) regulations will be absolutely bound to the Good Faith Estimate. The GFE will not vary from the costs on the Final HUD statement (sounds good?). But because any variance up in a cost will born by the lender issuing the original GFE, they will not be issuing a GFE until all parts of the transaction have been researched. For this reason you will see lenders use a loan cost worksheet for pre approval and loan cost estimates. This will be a ball park summation of the transaction costs based on a transaction outline.
So is the new regulation good or bad for the consumer? It is both.
It is good because unscrupulous lenders will no longer be able to add fees and costs that materialize at the closing table. It is also good as this should help continue to weed out the lenders who made their money in questionable ways.
It is not good in that borrowers will have less clout when comparing loans as they will not have anything binding on paper to compare. So what good was the old Good Faith Estimate anyway? It always did irk me when someone would show me another lenders GFE and ask me to match it. I would tell them I could not as the numbers were intentionally low. Sadly many found out I was correct at the last minute and at the other lenders closing table.
One thing to note; the new Good Faith Estimate will not show the borrower the total payment nor the estimated funds to close anywhere in the 3 pages.
If you have specific questions about the new Good Faith Estimate feel free to call.
Scrupulous loan offices and lenders would keep an open dialog so borrowers would know of changes in fees, programs, or any other component of the loan a “detour” on their part would cause. Unscrupulous lenders would misguide or detour borrowers so they could add junk fees or arbitrarily increase an original fee to help them make more money. This was the result of much of the deregulation that took place in the early and mid 90’s. History tells us that economic freefall is preceded by deregulation and then followed by a period of much increased regulation. As if the first of this year, our country entered the later.
The new Real Estate Settlement Procedures Act (RESPA) regulations will be absolutely bound to the Good Faith Estimate. The GFE will not vary from the costs on the Final HUD statement (sounds good?). But because any variance up in a cost will born by the lender issuing the original GFE, they will not be issuing a GFE until all parts of the transaction have been researched. For this reason you will see lenders use a loan cost worksheet for pre approval and loan cost estimates. This will be a ball park summation of the transaction costs based on a transaction outline.
So is the new regulation good or bad for the consumer? It is both.
It is good because unscrupulous lenders will no longer be able to add fees and costs that materialize at the closing table. It is also good as this should help continue to weed out the lenders who made their money in questionable ways.
It is not good in that borrowers will have less clout when comparing loans as they will not have anything binding on paper to compare. So what good was the old Good Faith Estimate anyway? It always did irk me when someone would show me another lenders GFE and ask me to match it. I would tell them I could not as the numbers were intentionally low. Sadly many found out I was correct at the last minute and at the other lenders closing table.
One thing to note; the new Good Faith Estimate will not show the borrower the total payment nor the estimated funds to close anywhere in the 3 pages.
If you have specific questions about the new Good Faith Estimate feel free to call.
Wednesday, January 27, 2010
Are We There Yet?
...at the bottom of the rate curve that is?
I cannot say for sure as my crystal ball in the shop for software upgrades.
I do think we are very close the end of interest rates in the High 4’s and Low 5’s. For one thing, the FED has announced it will stop buying mortgage backed securities and they are currently buying 80% of the new mortgages written in the US.
Calculated Risk, an insightful web site that tracks the movements of the housing and mortgage markets, has supplied evidence to support the coming rise in rates. Calculated Risk has noted the close relationship between the 30 year conventional mortgage fixed rate and the yield curve on the on the 10 year treasury note. Based on statistical analysis posted on their website, Calculated Risk is expecting to see rates rise to 5.5% based on the current yield of 3.45%
You have to be careful as statistics imply a certitude that does not always exist. It should be noted that the aforementioned model has a determination coefficient ( statistics speak for predictive value) of .97 which is very high. Today’s fixed rate is lower than 5.5; that difference is due to the FED purchasing Mortgage Backed Securities and Pre-payment speed and randomness ( refinance activity)
Look for rates to start moving up in the next couple months.
I cannot say for sure as my crystal ball in the shop for software upgrades.
I do think we are very close the end of interest rates in the High 4’s and Low 5’s. For one thing, the FED has announced it will stop buying mortgage backed securities and they are currently buying 80% of the new mortgages written in the US.
Calculated Risk, an insightful web site that tracks the movements of the housing and mortgage markets, has supplied evidence to support the coming rise in rates. Calculated Risk has noted the close relationship between the 30 year conventional mortgage fixed rate and the yield curve on the on the 10 year treasury note. Based on statistical analysis posted on their website, Calculated Risk is expecting to see rates rise to 5.5% based on the current yield of 3.45%
You have to be careful as statistics imply a certitude that does not always exist. It should be noted that the aforementioned model has a determination coefficient ( statistics speak for predictive value) of .97 which is very high. Today’s fixed rate is lower than 5.5; that difference is due to the FED purchasing Mortgage Backed Securities and Pre-payment speed and randomness ( refinance activity)
Look for rates to start moving up in the next couple months.
Wednesday, January 20, 2010
An Argument for Higher Rates
Our reasons for expecting mortgage rates to rise have been well documented: soaring gold prices, rising commodity prices, a weak dollar on the international stage, record federal deficits and a record low federal funds rate. To that, we will add the Federal Reserve's acknowledgement that household spending "appears to be expanding" and economic activity "has continued to pick up."
At this point, we would welcome rising interest rates. Rising interest rates are a byproduct of rising economic activity, and rising economic activity necessitates rising employment. If there is one thing our economy needs more than anything, it is rising employment. Low interest rates, low housing prices and tax credits are all well and good, but their impacts are dwarfed by employment. If you don't have a job, low interest rates, low housing prices and tax credits are meaningless.
What's more, rising interest rates would stimulate activity. Potential borrowers have grown languid over the past few weeks; there is no urgency to get out and buy or even refinance a home because of expectations for a prolonged low-rate environment. Rising rates would change those expectations and prompt many potential borrowers to act.
In the meantime, we still think prompting them to act before rates start rising is not such a bad idea.
At this point, we would welcome rising interest rates. Rising interest rates are a byproduct of rising economic activity, and rising economic activity necessitates rising employment. If there is one thing our economy needs more than anything, it is rising employment. Low interest rates, low housing prices and tax credits are all well and good, but their impacts are dwarfed by employment. If you don't have a job, low interest rates, low housing prices and tax credits are meaningless.
What's more, rising interest rates would stimulate activity. Potential borrowers have grown languid over the past few weeks; there is no urgency to get out and buy or even refinance a home because of expectations for a prolonged low-rate environment. Rising rates would change those expectations and prompt many potential borrowers to act.
In the meantime, we still think prompting them to act before rates start rising is not such a bad idea.
Thursday, January 14, 2010
buying a home TODAY
The state of our economy is on the minds of everyone these day and many are wondering what the state of home lending currently is. With 'Big Banking' making the morning news and front page of newspapers daily, I am amazed at how much I see that is misleading and down right untrue. Mortgage Lending has changed a great deal from the “wild west” days of "have a pulse get a loan"; unfortunately that has had a hand in putting our economy where it is today.
Lending has returned to the days of the early 60”s and rates are about the same as then too! Home buyers need to look at their budgets and determine if home ownership is fiscally prudent or if waiting for debts to be paid off, savings to build up, or jobs to stabilize is in their best interest.
When meeting with a home loan professional to pre qualify for a mortgage loan you will be required to prove (on paper) your income and you must have money in the bank you can work with. Having been a mortgage loan professional for the last 18 years I have seen the pendulum swing both ways. I can honestly tell you that if you want to buy a home, be it a first one or to step up to a larger property, now is a great time to do so.
For first time buyers there programs like FHA, VA Or USDA that allow for small, to no down payment on the purchase price. These programs have a maze of qualifying overlays so you will want and need a qualified professional to help you navigate, but opportunity is out there. Besides the $8000.00 government tax credit for first time buyers, many can obtain grants, down payment assistance, and my bank even has a savings plan where we match your money 3/1 up to $5000.00.
Whether you are just thinking about, discussing over dinner or are ready to meet with a mortgage lender, buying a home in today's market requires you to be realistic in how much home you can afford. First time buyers must remember that starter homes are just that, a home to start you down the road to your dream home.
Lending has returned to the days of the early 60”s and rates are about the same as then too! Home buyers need to look at their budgets and determine if home ownership is fiscally prudent or if waiting for debts to be paid off, savings to build up, or jobs to stabilize is in their best interest.
When meeting with a home loan professional to pre qualify for a mortgage loan you will be required to prove (on paper) your income and you must have money in the bank you can work with. Having been a mortgage loan professional for the last 18 years I have seen the pendulum swing both ways. I can honestly tell you that if you want to buy a home, be it a first one or to step up to a larger property, now is a great time to do so.
For first time buyers there programs like FHA, VA Or USDA that allow for small, to no down payment on the purchase price. These programs have a maze of qualifying overlays so you will want and need a qualified professional to help you navigate, but opportunity is out there. Besides the $8000.00 government tax credit for first time buyers, many can obtain grants, down payment assistance, and my bank even has a savings plan where we match your money 3/1 up to $5000.00.
Whether you are just thinking about, discussing over dinner or are ready to meet with a mortgage lender, buying a home in today's market requires you to be realistic in how much home you can afford. First time buyers must remember that starter homes are just that, a home to start you down the road to your dream home.
Tuesday, January 5, 2010
What Lies Ahead For 2010 Home Buyers?
Well it looks like we can count on one thing... no one is can predict what will happen this year. However, it was predicted that 2009 would end better than it began, and that was correct. But then again, there really was no place to go but UP. As I have said to many clients the past year, a low base and our outlook have made it a buyers market.
Looking ahead into 2010 I do see improvement in home sales and pricing. It may even be that for a time, it is a bit of a sellers market; especially as the home buyer credit is set to expire April 30th. Like the $8000.00 tax credit, sub 5% interest rates can not stay around for ever. It will be interesting to see home sale and mortgage volumes come June/mid year, when these stimuli are gone.
The overriding factor holding our economy down is the jobs market. Until we get the prospects for employment turned around, we will see a slow to no housing market increase. This is good for first time buyers who have stable ,but not as good for the rest of us.
Looking ahead into 2010 I do see improvement in home sales and pricing. It may even be that for a time, it is a bit of a sellers market; especially as the home buyer credit is set to expire April 30th. Like the $8000.00 tax credit, sub 5% interest rates can not stay around for ever. It will be interesting to see home sale and mortgage volumes come June/mid year, when these stimuli are gone.
The overriding factor holding our economy down is the jobs market. Until we get the prospects for employment turned around, we will see a slow to no housing market increase. This is good for first time buyers who have stable ,but not as good for the rest of us.
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