Rising Rates & Affordability: “How Much Can You Finance with $960/Month?”

March 15, 2017

As rates rise, affordability dwindles.  If you want more home for the same monthly payment, acting before rate rise further may be a direct path to success.

Each example here shows the principal and interest payment for a 30-year, fixed-rate loan.

1) Loan of $200,000 – Interest rate: 4.00% / 4.25% APR – Payment = $955

2) Loan of $180,000 – Interest rate: 5.00% / 5.27% APR – Payment = $966

3) Loan of $160,000 – Interest rate of 6.00% / 6.29% APR – Payment = $959

It’s pretty amazing that a rate increase of just 2% can impact affordability by as much as $40,000.  Rates have been artificially low for some time now due to Fed intervention.  As this stimulus is removed, the usual result is the rates to rise.  Rates have already started rising just in expectation of a change in Feb policy.

Act NOW to buy the house you desire without the risk of losing your opportunity to lock-in these amazing low rates.  I can help you or those you know get a low interest rate loan before further increases go into effect.

page-0

Advertisements

No More 30-day Closings? The Elephant in the Room!

May 28, 2015

TRID? – On August 1, 2015 the Consumer Financial Protection Bureau (CFPB) is requiring the roll-out and enforced usage of new mortgage loan disclosures and replacing others.  TRID stands for the “Truth-in-Lending and Real Estate Settlement Procedures Act Integrated Disclosures” and these new disclosures will replace the Good Faith Estimate, Truth-in-Lending Disclosure and the HUD Settlement Statement. WOW! This is big news and these new disclosures (Loan Estimate and Closing Disclosure) will mean BIG CHANGES for many of the parties in a Real Estate purchase and refinance transaction.

Expect-Delays-sign(1)

New mortgage disclosures = MORE PAGES + MORE DELAYS.

In our industry, new disclosures usually means MORE PAGES and MORE DELAYS!  This is also true in this case.  These new disclosures will require a delay before the appraisal order can be placed.  The borrower must know exactly what their loan will look like BEFORE the appraisal is ordered and this will result in delays “out of the chute” for many new loans simply because many borrowers are still considering their loan options during those first few days of the mortgage loan process and sometimes have not had time to fully consider the consequences of a 15 year loan verses a 30 year loan, or an FHA mortgage with less down payment compared to a conforming mortgage which usually requires more down but a less expensive monthly mortgage insurance premium.  All of this must be considered, numbers need to be gathered and compared and a busy couple with active kids needs to find a few peaceful few minutes to consider all of this information in the midst of inspections, contingencies, offers, counter-offers and packing!  YIKES!

If that is not enough, the biggest delay related to these new disclosures comes at the end when everyone is weary, worn-out and tired of receiving daily emails from their loan originators, Realtor, inspectors, movers, utility companies, etc.  All of the final numbers represented on the new Closing Disclosure (which replaces the old HUD 1 Settlement Statement) must be “spot-on”, no changes and exact – 3 DAYS PRIOR TO THE CLOSING DATE!  This means no additional changes, last minute fees, or forgotten invoices can be added during those last 3 days prior to the closing date.  If so, then the closing will be pushed back another 3 days to allow the new Closing Disclosure to be printed and received by the borrower to review. Here is link from Frank and Brian at the National Real Estate Post where their video gives more details: Click Here.

The issue at hand with these new disclosures - Will 30 day purchase closings be a thing of the past after August 1?

The issue at hand with these new disclosures – The Elephant in the Room – Will 30 day purchase closings be a thing of the past after August 1?

Many in the industry are hinting at the likely consequences of these delays come August 1 but I have not heard any admit what I am about to say.  Realtors who what to avoid the high-pressure finger-pointing, name calling, threatening phone calls and punishing per-diem being charged to their buyers caught in the middle of these changes will wisely prepare their buyers and sellers for 45-60 day closings rather than 30-40 days closings which will result in eventual extensions and everyone hating everyone at the end of the transaction.  Allow me to address the elephant in the room – these loans will not close until the lenders fulfill the new federally mandated time-lines which are put in place to protect the buyers from being rushed into a 30-year decision – regardless of when a Real Estate Purchase Agreement says the transaction will close.

Please be smart when setting realistic expectations with buyers, sellers, Realtors and your loan originators and set dates which will allow the new system to work to protect the buyer from being caught in a pressure-cooker of unrealistic and overly demanding deadlines which do not serve anyone well.  It is my opinion that a 30 day closing for a purchase transaction is now another historical display in the Museum of Mortgage Lending right beside pre-payment penalties, negative amortization, interest-only loans and 30-day adjustable mortgages.

The CFPB wants to do all they can insure that there will be no surprises for any borrower at the closing table.

The CFPB wants to do all they can insure that there will be no surprises for any borrower at the closing table.

Rushing a home buyer into a 30 year commitment and several hundred thousand dollars of debt with a stack of “sign here quickly” documents and terms not understood or clearly explained is never a good idea, in my opinion.  The CFPB is doing their best to slow this whole process down to allow the borrower digest the details of what is happening.  Buyers. sellers, Realtors, closing attorneys and mortgage originators must now embrace these changes, work as a team and make these Real Estate transactions a positive experience for all parties involved.  Our industries need the public trust and these changes are part of us all working together to rebuild what was lost in the “rush to simply close deals” from 2000-2008 with very consideration given to making sure the buyer knows what they are signing at the closing table.

REALTORS – To view a video presentation by Kenneth Trepeta Esq, Director of Real Estate Services for NAR, explain the new rules and regulations and review the new forms – CLICK HERE.


HUD Proposes Lowering FHA Loan Limits in Middle Tennessee

May 31, 2011

Last Thursday, just before the long Memorial Day weekend marking the beginning of the 2011 summer, the US Department of Housing and Urban Development (HUD) released a 23 page proposal outlining loan limit decreases in 669 US counties – 13 of them in Tennessee and all of these located in middle Tennessee. 

Unless Congress prohibits these proposals, beginning October 1, 2011, each of these 13 counties, including Cannon, Cheatham, Davidson, Dickson, Hickman, Macon, Robertson, Rutherford, Smith, Sumner, Trousdale, Williamson, Wilson, will see their maximum FHA loan limit decrease $39,200 to a new lower maximum FHA loan limit of $393,300. 

Counties Affected by Possible Decrease in FHA Loan Limits for Loans

The current FHA maximum loan limit in these 13 counties was set at $432,500 in 2008 as a part of the Housing and Economic and Recovery Act during the waning days of the Bush administration in an attempt to stabilize the fragile housing and credit industries. 

This 9% decrease in FHA maximum loan limits in middle Tennessee will affect less than .5% of all of the FHA loans being originated in these middle Tennessee counties.  HUD decision to lower these maximum loan limits is an attempt to ward off the Republican critics in the US House of Representatives who are proposing changes to the FHA mortgage insurance program to limit the expansion of the risk of taxpayer supported programs in hope that private players and investors will re-enter the mortgage industry to replace what the Federal Government discontinues subsidizing.

Last year 32,126 FHA loans were closed in these 13 middle Tennessee counties and the new decrease in loan limits would have affected 138 of those transactions.  The argument could be made that Tennesseans borrowing more than $393,300 to buy or refinance a house would have been able to use other loan programs or that other non-government programs would be developed if FHA would move out of this particular high-end market.  Statistically, these higher-end mortgages have preformed much better than the lower-end mortgages but HUD would argue that these loans are not part of their stated mission to target “lower and middle-income borrowers” when they are using taxpayer money to operate a program insuring home mortgages at more than 150% higher than the Area Median House Price.

What is the expected outcome of such a move if Congress does not block these proposals for home buyers in Tennessee? 

Minimal.  Most first-time home buyers or home buyers with a scarred credit profile are not buying homes $400,000+ homes with only a 3.5% down payment as currently required by HUD for FHA insured loans. 

The initial potential panic caused by news reports of such proposals may cause a handful of buyers to get off the fence to get approved for their high-end FHA insured mortgage in order to beat the October 1, 2011 deadline but because so few Tennesseans will be affected by this proposal, only 138 in 2010, the Tennessee Congressional Delegation would likely not support any legislation thwarting efforts by HUD to continue to solidify the government supported mortgage insurance program – especially if these changes will affect only a few wealthy Tennessee home buyers.


Homeownership Brings Real Benefits

February 21, 2011

 

In August of 2010 the National Association of Realtors released a research study highlighting some of the social benefits of homeownership.

 

Their list included:

– Homeownership stabilizes neighborhoods.

– Homeowners are more likely to participate civically.

– Homeownership produces higher life satisfaction.

– Homeownership fosters less neighbor crime.

– Homeownership and housing stability lower teenage pregnancy and public assistance.

– Homeownership fosters quality property maintenance and improvement.

Most recently the NAR released these timely reminders:

“Good jobs enable people to achieve the American dream of home ownership. And every time a house is built, bought, or sold, jobs are created-lots of them-right here at home.”

– Home sales in this country generate more than 2.5 million private-sector jobs in an average year. For every two homes sold, a job is created.

– Each home sale touches 80 different occupations.

– Every home purchased pumps up to $60,000 into the economy over time for furniture, home improvements, and related items.

– Housing accounts for more than 15% of the Gross Domestic Product, making it a key driver in our national economy.

– Housing has led this country out of six of the last eight recessions.

“America needs jobs. Housing creates jobs. That’s one of the many reasons home ownership matters to people, to communities, to America.”

“Strong federal government support of home ownership equals strong support for American jobs. We urge the Obama Administration and the U.S. Congress—as they debate the new federal budget and reform proposals for the nation’s mortgage finance system—to continue federal support for home ownership.”

“Jobs and Home Ownership. You can’t have one without the other.”


Cash for Cottages, Castles and Condos: NO TRADE-IN REQUIRED!

August 8, 2009

by Brian Short, CMC, CRMS, GMACertified Mortgage Professional

            The US Senate just approved another $2 Billion for the auto industry’s stimulus program referred to as “Cash for Clunkers” after the first $1 Billion was used up last week in only 3 days.  It seems, at first glance, that this auto industry bail-out program might be havingCash for Clunkers some positive affect on another ailing US industry.  At least the players are allowing the program to work.  The Feds are giving away money (whether you agree with this approach or not), the dealers are accepting the qualifying vehicles and giving a $4,500 trade-in allowance toward a new qualifying car, and US consumers are using up the allowed funds to work this program.

            The housing industry has witness many attempts by the Feds to “jump-start” the stalled industry for the past 12-18 months.  One of the first was the FHA Secure Program with “impossible to qualify” underwriting guidelines for those who had made late payments on their adjustable mortgages.  Most of the national wholesalers were not participating and none of the FHA participating lenders would approve these borrowers for this program. 

            The Troubled Assets Recovery Program (TARP) initiated by then Treasury Secretary Henry Paulson and President Bush and expanded by the Obama administration attempted to infuse cash into the ailing national and regional banks so they would be more willing to free up credit to business owners, home owners and borrowers.  However, with the expansion of this TARP program came the announcement that the Feds could jump into the books of any bank who received these funds to determine if they were “financially solvent enough” to avoid a federal government take over.  Some banks refused the money, others returned it and most who received it held on to it to bolster their bottom line figures.  Either way, no credit was freed up and no home owners, home buyers, home builders or Real Estate industry players have received any relief from such a misguided and over funded Federal effort.

            The recent announcement by President Obama to design a federal loan modification program has been met with delays and unresponsiveness by Bank of America and Well Fargo – the nation’s two largest remaining banks holding the largest number of servicing rights on most of America’s residential mortgages.  On the one hand, these banks appear very unwilling to work with their customers to write down loan balances or interest rates to keep the existing home owner in the home, and yet on the other hand, they are all saying that they do not want any more foreclosed properties and the process of foreclosing on US homes is causing home values to dive bomb unlike anything we have ever experienced.

8000 dollars The one program still being promoted – “$8,000 tax credit of first-time homebuyers” – is far too limited in its scope.  This author was calling for this approach long before the Feds rolled out their version.  However, we were calling for a tax credit for any down-payment and closing costs used to buy a house by ANY buyer.  Only this breadth of a program which would include Real Estate investors, buyers of second homes and “move-up” or “move-down” buyers will truly have any effect of the most critical industry in our downward spiraling US economy. 

            Again, I am calling for the inclusion of those solid borrowers, experienced buyers and business owners to be enticed to get off the sidelines and risk THEIR capital (rather than the future Federal tax revenues for generations to come!) to help get the housing industry out of the dumps. 

            The average first-time homebuyer is still too scared and too inexperienced to be a major player in rescuing the ailing housing industry.  They are fearing for their own job security and seeing house prices plummet causes them to be squeamish about investing what little cash they can scrape together to buy something which may be worth less than what they paid in 2-3 years when they might be ready to sell and buy something bigger or in a different location.  This group of buyers does not have the “staying power” to be the key to a housing industry recovery.  Bring in the Pros!  We need the seasoned home buyers and investors to be encouraged to buy up the housing inventory busting at the seams so builders will be enticed to start building again.

            In the meantime, those who desire to take advantage of the $8,000 tax credit have less than 4 months to get their first-time home purchase selected, financed and closed.  This is not much time in light of heightened underwriting requirements, appraisal delays and turn times in wholesale approval processes.  Those who can benefit from this limited time tax credit must move quickly to get the benefit of the $8,000 “give-away” by the Feds. 

            If you or someone you know has not owned a house in the past 3 years and desire to buy a house before the end of the year to take advantage of this $8,000 refund of all tax withholdings during 2009 and an outright rebate of whatever the difference is between what has been withheld and $8,000, they must get into the game quickly by contacting a Certified Mortgage Professional to get pre-qualified before going out to shop for houses with a Realtor.  The clock is ticking.  There is no promise that the Feds will extend or revamp this program once it expires on December 1, 2009, regardless of how many housing experts, like this author, call for a program which will really help the struggling housing industry.  Sellers are motivated to sell, there is a record-breaking level of houses included in the existing home inventory, and Realtors and Certified Mortgage Professionals have time to give a first-time buyer the time and attention they need to make a great choice to get into (or back into) the housing market.

            The good news is – no “clunker” trade-in is required to participate in this cash give-away.  You can buy anything you want and still get the $8,000 tax credit – a cottage, a castle or a condo!  COME ON DOWN!  You’re already a winner!


New Appraisal Rules Bad for Consumers and Recovery

June 9, 2009

By Brian Short, CMC, CRMS, GMA

Beginning on May 1st of this year (2009) any home buyer or homeowner getting a new mortgage on their house will be up-charged $150-$250 for their appraisal and generally charged an additional $968 to close their new loan!  You mean, you never heard about this?  You thought the government was doing all it could to stimulate the struggling housing industry?  Guess again!

A year ago, one attorney general in New York, with a famous last name,

NY AG Andrew Cuomo

NY AG Andrew Cuomo

Cuomo,  struck a deal with Fannie Mae and Freddie Mac to keep them out of a potentially very ugly and very public law suit because of blind eyes they had been turning to a now bankrupt bank, Washington Mutual. 

You see, WaMu (as they are known in the banking world) had a side business they were operating where they started an Appraisal Management Firm where they required their loans to include an appraisal only from those “independent” appraisers who would join their firm and work for 3/4 of what most professional-level appraisers would work. 

Keep in mind, this did not lower the cost to the consumer.  Their appraisals still cost the same.  It was simply another income stream for the bank and a way to control who did their appraisals.  These appraisers soon learned who “buttered their bread” and were very careful to give the federally chartered bank the value they needed to get their loan closed.  Sounds fishy, huh?  YOU BET IT DOES!

Now enters the young Cuomo, called Andrew, with his eyes on bigger political prizes.  He uncovers this corruption and sues WaMu, Fannie Mae and Freddie Mac – who all seemed to know that WaMu was doing this.  (Countrywide/Bank of America STILL own their Appraisal Management firm – Landsafe!)  To head off this embarrassing high-profile lawsuit they struck an “out-of-court” settlement which goes far beyond the jurisdiction of the state attorney general.

He asked for, and received, assurances that no Fannie Mae or Freddie Mac loans would ever be accepted by federally chartered banks who required that their appraisals were done by their own appraisal management firms?  Right?  Wrong!!  Wrong!!  Wrong!!

This new agreement which went into effect on May 1st exempted ALL FEDERALLY CHARTERED BANKS!  The new agreement, crafted in Albany, NY was never approved by Congress or any state legislature. It was drawn up in some back-room to avoid a trial against a corrupt bank doing corrupt business with a corrupt Appraisal Management firm they owned – most likely known about by both corrupt Government Sponsored Entities (GSE’s) Freddie Mac and Fannie Mae!  And to top it off, ALL FEDERALLY CHARTERED BANKS are exempt!  This new “back-room agreement” only affects mortgage brokers and bankers who are generally supervised or chartered by state banking regulators.

WaMu is NoMoIf that was not enough, it now requires all appraisals to be ordered through APPRAISAL MANAGEMENT FIRMS!!!  This very same corrupt system that WaMu used to artificially inflate their appraisal values to ensure that their loans would close – making sure that no independent third parties were involved in the process of assigning values to the properties under consideration!  What?!?!? 

I thought it was the corrupt Appraisal Management Firm model of business that had proven itself to be untrustworthy in the New York back-room in that courthouse in Albany?  Why is it that Mr. Cuomo would wrongly insist that ALL APPRAISALS now be ordered and up-charged by centralized corporate middle-men who do not know local property values, local building standards, and local business practices.  This new layer of New York mandated bureaucracy is required all across the country without a single vote or hearing from industry insiders on how it would negatively affect the struggling mortgage and Real Estate industries. 

These “middle-men” are unregulated by any federal or state agency but have been given the task of arranging for 70-80% of all mortgages being closed in the country and up-charging the cost of that appraisal by $150-$250 per order and passing that cost on to the unassuming buyer or homeowner.  Those $300 appraisals are now costing $400 – $500 for someone outside the state to assign the work to someone with whom they have a working agreement who may or may not live in the area, ever work in the area, or have ever researched the housing market in the area of where the appraisal needs to be done. 

What is their qualification for getting to do this appraisal for this Appraisal Management Firm?  They have promised to work cheap and fast!  Is that who you want to do your appraisal?  Cheap and fast?!?  Who benefits from this arrangement?  The host of newly formed unregulated and unsupervised Appraisal Management Firms are making out like bandits!  Everyone else in the transaction is supervised by a state or federal agency or governing board – Realtors, Mortgage Professionals, Home Inspectors, Insurance Agents, Surveyors, Builders, Title Agents, Appraisers – they’re all tested, licensed, and regulated.  Who tests, licenses or regulates the Appraisal Management Firms?  Why should they be making any money in this transaction?  What are they professionals at doing?  Looking at the next name on a list of random appraisers who have agreed to work for what they will pay them – even if they are not local professionals themselves.

It is reported that this new layer of middle-men have added another 5-10 days on the already very slow loan underwriting timetable causing delays in loan closings which cost the borrower an additional $500-$1,000 to extend the rate lock so they still receive the rate they agreed to receive at the time of the loan application.  Some have estimated that this new over-reaching agreement will cost Americans $2.8 BILLION EVERY YEAR and cause weeks of delays in closing Real Estate mortgages!

Let me make sure I get this right – the consumer is paying anywhere from $650- $1,250 to get an inferior appraisal done which takes longer to get back simply because a nationally chartered bank had an Appraisal Management Firm in their “back pocket” and they were so corrupt that they are no longer in business.  That was the punishment put on all American borrowers by one attorney general in one state up in the northeast because he had dirt on some crooks at Fannie Mae and Freddie Mac?  This can’t be good! 

Would you like to join the thousands of housing industry professionals in calling those who forced this on you and your neighbors without a single vote or hearing?  CLICK HERE to see who you can call and make your voice of protest heard.


It’s STILL All About CREDIT!

June 1, 2009

By Brian Short, CMC, CRMS, GMA

Six months after we were told that giving the auto industries $30 BILLION would save them (in spite of the SCREAMING from nobodies like this author and others! See: https://promortgagematters.com/2008/12/05/are-they-still-clueless-a-time-for-real-ideas-to-move-forward/) GM (now affectionately referred to as “Government” Motors!) has taken our money with them – down the drain!GM

However, that’s not all!  This NEW PLAN to “restructure” GM involves another $50 BILLION from the US Government to this company which is now owned, in part, by the very thugs and shysters (the UAW) who helped bring them to their knees rather than give concessions to keep their employer solvent.  Now GM is owned by the US Government and being run by this Administration (headed by the “Community Organizer in Chief”)  the Unions put in office with the help of  the Black Panther club-toting “poll monitors” and ACORN.

GM stock is now trading at $.70 and has been taken off the Dow 30 but the UAW retirement plan is getting the backing of the US Federal Government.  What about all of those other retirement funds which had played by the rules and bought GM stock when it was selling for $90 at it peak?  Who is backing and guaranteeing those retirees? 

Why does this administration feel the obligation to artificially prop up the union retirees at the expense of the non-union retirees?  Would it have anything about securing future votes or rewarding them for past votes?  Is this really good for our free market economy?  Does this plan to pour another $50-$100 BILLION into GM before the end of 2009 really do anything for 100 MILLION non-union workers who are still fighting every week to make their house payments and keep their jobs?

frozen_credit_marketJust as a reminder, this economic crisis was brought about because of the loss of credit – first in the housing industry, then for business owners, college students, auto dealers, big-box retail chains, etc.  We have now all felt the crash of the loss of credit and free-flowing funds on the secondary banking markets. 

To continue to throw BILLIONS of dollars at each of these failing industries without fixing the PRIME ROOT of this disaster is like trying to use a “Sham-Wow!” to fix a broken dam.  There may be water all over the road but that is not hardly the problem.  Some major concrete reconstruction at the source of the cracks is what is required to keep the water from running over the road.

The issue at stake is shoring up the banking credit markets so the other industries dependent on free flowing credit (i.e. housing, autos, retail, college loans, etc.) can begin to normalize.  Propping up other industries before the banking and credit markets are stabilized is still “throwing good money after bad.” (My dad always said this.  I’m not real sure what it means.  However, I think you get my point!)

During Bill Clinton’s successful run for President against an originally economy%20stupidassumed unbeatable George H. W. Bush, who had become nearly an overnight national hero for a seemingly bloodless war to remove Saddam Hussein from his occupation of Kuwait, was given its momentum from a phrase coined by campaign adviser James Carville in 1992 when he chimed “It’s the Economy, Stupid.”  He turned the debate from Bush’s noble handling of foreign affairs to the faltering economy (which Bush had attempted to fix by caving in on his pledge  – “Read My Lips” – for no new taxes during his administration to pacify an uncooperative Democratically controlled Congress).

The Clinton campaign continued to hammer out it focus on the economy -“It’s the Economy, Stupid!”  – and they changed public opinion away from the foreign affairs hero in favor of a small-town southern Governor who had never lived or worked in Washington, DC.

Once again, the attention of the public must be turned – “It’s the Credit Market, Stupid!” – to get this currently distracted administration away from simply returning campaign favors and shoring up organized gangsterism and thugery shrouded in “labor protection” movements and “community organizations.”  The American public must see through this type of “Chicago Style” politics and demand that our elected representatives quit passing out money they don’t have in order to make promises they can’t keep at the expense of generations they won’t ever meet!