Why are (some) Homeowners having Payment Problems

The top 3 reasons for housing payment distress:

• Reduced Income
• Too Much Debt
• Unemployment

Behind these reasons there is one more: Lack of reserves. 

Life is always throwing curve balls. However, 40% of Americans could not come up with $3,000 to cover an emergency. So, the number one defense is a plan.

Do you have a plan?

Do you have an adequate emergency fund?

Are the Largest Mortgage Lenders Throtling Housing Recovery?

The WSJ reports that WSJ on Tighter Lending the top mortgage lenders are rejecting more home buyers than ever. Last year the top ten lenders rejected 26.8% of all applications up from 23.5% in 2009. This, in turn, is negatively impacting the already fragile housing market.

The article reports that some of the blame accrues to FNMA and Freddie, the two government-backed entities that ultimately set the standard for 90% of mortgage loans. These entities are placing ever tightening restrictions on lenders. (BTW, the article ignores the negative impact of 'Price Adjustors' imposed by FNMA and Freddie which can add two and a half points to the origination cost of a mortgage for a borrower with a 679 credit score putting down a twenty percent down payment.)

As I have previously stated, I personally find the 26.8% rejection rate appalling. My average approval rate is above 98%. 

You be the judge: where should you send a client or friend that is looking for a mortgage for their home purchase or refinance?  

The TwentyFirst CEntury Beckons: Wish me Luck

June is turning into my technology month. 

I am migrating my phones to a Voice Over Internet system (thank you Steve, Duncan and Brian.) Migration will take weeks as we must port our existing phone numbers over to the new company. I did get a chance to play today and was wowed by the system capabilities.


Next week sees the replacement of our existing firewall with the installation of an advanced firewall and security device. We'll ultimately be able to set up a rollover capability, so, when our cable goes down we'll switch to wireless internet.


Then the following week we are swapping email providers. Our new system will provide managed Exchange access (which will interface with my new phone system as well as allow secure mobile access.)


What are the odds I'll live through this without a nervous breakdown?

Dave

Is the housing market going down? Is the housing market going up?

At a time when pundits are racing about predicting the future of the universe and other such, there is no dearth of published opinion about when, if ever, the real estate market will recover. My opinion: given all the pundits at least one will be right (at least for a short while.)

While they speculate, it may be helpful to remember that "All Real Estate is Local". So, if you want to know what your home is worth or where your market is trending, talk to the expert: your local realtor. BTW, it helps if you pick an excellent realtor. Find out who the best person is in your neighborhood. (Hint: it is probably not a part-time real estate sales person. Hint #2: it may well not be the realtor who spends the most on self-promotion)

Need help finding a great person to talk to? I have a huge network of great realtors and would be delighted to introduce you to people who I think are great.

Who is Afraid of September 30?

In about 100 days, the legislation that forced FNMA and Freddie Mac to lend up to $729,750 (in certain markets) will expire to be replaced (as applicable) by High Balance limits.

Let me explain. Traditionally, lenders were able to offer mortgages at favorable terms on loan amounts up to the Conforming loan limits set by FNMA and Freddie Mac. Because FNMA and Freddie Mac stood behind these loans, the rates for the loans were better than other loans available in the marketplace. As a general rule, before the mortgage market imploded in 2008, rates for Jumbo loans were about 1/4% higher than otherwise comparable conforming loans. 

After the market implosion, it became very difficult to obtain financing for these larger loans. So, Congress mandated that FNMA and Freddie Mac offer larger loans in higher cost markets. They created two limits: Temporary which  expire September 30 and High Balance which will continue in effect.

                   Property       Conforming  High Balance  Temporary

 1 Unit             $417,000        $625,500         $729,750      
2 Units            $533,850        $800,775        $934,200      
 3 Units            $645,300        $967,950        $1,129,250     

4 Units           $801,950       $1,202,925      $1,403,400     

Importantly, loans with Temporary Loan Limits must close by September 30. Lenders will not be able to grant extensions for these loans beyond that date!

Your Mortgage Guy: How High Will Rates Go?

Your Mortgage Guy: How High Will Rates Go?: "There is much fear these days about rates spiking once the economy recovers. You even hear 'Genius' economists are predicting rampant inflat..."

How High Will Rates Go?

There is much fear these days about rates spiking once the economy recovers. You even hear 'Genius' economists are predicting rampant inflation and double-digit inflation. I believe they are wrong!

There used to be a saying that the Military is always preparing for the 'last war'. Well that is what these pundits are doing. The chart below demonstrates that inflation has been under control for the past twenty years. Odds are that even if inflation spikes, that spike will be short lived.

What does that mean for you? It means that mortgage interest rates are less likely to rise uncontrollably in the future. [We may, however, see periods of higher rates due to other factors, including liquidity.]

So you think you'll get approved for a mortgage ...

According to a recent report,   Half of All Mortgages Rejected , banks are rejecting about half of all mortgage applications.

Let me put that in perspective for you. I can tell you that I am batting virtually 100% on getting my clients loans approved. My peers in the mortgage professional world are doing about the same. So if half of all loans are getting rejected, it really means that 70 - 80% of all mortgages for borrowers who are not represented by mortgage professionals are being denied.

My advice: If you are purchasing a home or looking to refinance, work with a mortgage professional.  Why? Because we do not get paid unless you get your mortgage, so, we'll tell you the truth. And, the statistics show that we do a better job than the banks.

all of my loans are

Will the Fed make it more difficult for women to get credit cards?

Forbes reports that under new Fed regulations, banks will be prohibited from issuing credit cards to individuals who do not have income. Historically, credit card issuers were able to factor in household income when issuing credit cards. The new regulations require that banks consider only individual income in determining qualification for new credit. Why? Because the Fed wants to prevent students from piling up credit card debt that they cannot repay.

But, the 'law of unintended consequences' is unmerciful. The Regulations will also prevent many credit worthy people from obtaining credit cards. For example, it will become more difficult for some retirees to obtain credit - even if they have significant assets. More significantly, stay-at-home moms will find it almost impossible to get their own credit cards.

Forbes Article

How hard is it to cancel PMI

No one likes to pay PMI. It is bad enough having to pay your mortgage every month. PMI - insurance required by lenders when a homeowner borrows more than 80% of the value of a home - which is of no (direct) benefit to the borrower, adds insult to injury. So, the quicker you can get rid of it the quicker you save.

Can you get rid of PMI?  The good news is that under the Homeowners Protection Act of 1998, banks are obligated to terminate PMI when the mortgage balance falls below 78% of the original value of the home at the time the mortgage was obtained.

Is that all? No. Borrowers can also petition the mortgage holder to drop PMI when the value of the home rises. Admittedly, in our declining market this is happening less frequently. However, clients who buy a 'fixer-upper' may see real appreciation when the work is complete. We have assisted a number of our clients is getting the PMI waived - generally at least a year or two after they took out the mortgage.And, as the real estate market recovers (and it will recover) there will be opportunities to drop PMI in the near future.

Show me the papers!

The Wall Street Journal reports that homeowners are successfully fighting foreclosure by demanding that banks produce evidence that they 'own' the loan. Link to WSJ Article