A Simple Visual on the Current Mortgage Landscape

January 18, 2008 by 2 Comments

Fellow Certified Mortgage Planning Specialist, Dan Green, has created a very easy to understand explanation of what has happened in the mortgage industry.   I highly encourage you to watch this short video presentation showing a history from 2000 to our present condition and how this situation impacts all of us, including "prime" borrowers.

The Mortgage Reports, is written in a very easy to understand style and packed with great informative content.   This is one of my must reads that I’m subscribed to…if you want to understand more about mortgages, perhaps you should too (and don’t forget to subscribe The Mortgage Porter in the upper right corner of this site)!

Friday’s rates will follow later this afternoon.

Filed Under: Mortgage, Refinance, Subprime Lending

Local Mortgage Wholesale Office Closes Today

January 16, 2008 by Leave a Comment

Update January 17, 2008.  I just called Bellevue’s office of MortgageIt where the receptionist told me "we’re not closed YET".  I asked if they were closing and why would their rep send this email out and she replied that other offices are closing and she has no idea why the rep sent the email.   These are odd times for sure.  I’ll try to get to the bottom of this.

Update January 17, 2008 5:30 pm.  I understand that MortgageIt will be closing their Bellevue office at the end of this month.  I guess our rep was a wee bit premature with her announcement.

I just received this email from our Wholesale Rep of MortgageIt in Bellevue:

Hello!
I just wanted to let all of you know that the Bellevue Branch of MortgageIT has closed today.  I wanted to wish all of you well and the best of luck in the New Year.  I will truly miss the relationships I have made in this industry….Please keep in touch.  Thanks again!
Sincerely,
Stephanie Price
MortgageIt is a subsidiary of Deutsche Bank.   From another Bellevue MortgageIt Account Executive Krisel Anderson’s site on Active Rain:
MortgageIT is a growing Top 25 lender that originated approximately $29 billion in wholesale, retail and correspondent loans in 2005 and continues to build a network of established offices in the US.
I have no idea if other branches have been closed as well.  I’ll provide more information when I receive it. 
Update – January 16, 2008 1:15 pm:  I just received a generated rate sheet from MortgageIt stating that prices have worsened (many lenders are sending new rate sheets due to the changes in rate today).   So perhaps it’s just the Bellevue Branch that is closed.   I was expecting it to be a formal announcement from MortgageIt.   What have you heard?
Filed Under: Mortgage

Bits and Pieces from the FOMC Minutes

January 3, 2008 by Leave a Comment

Here are a few bits and pieces from the minutes of the FOMC meeting from December 11, 2007 that was released today.

"In the housing market, new home sales were below their third-quarter pace, and sales of existing homes were flat in October following sharp declines in August and September. These declines likely were exacerbated by the deterioration in nonprime mortgage markets and by the higher interest rates and tighter lending conditions for jumbo loans….

Participants discussed in detail the resurgence of stresses in financial markets in November. The renewed stresses reflected evidence that the performance of mortgage-related assets was deteriorating further, potentially increasing the losses that were being borne in part by a number of major financial firms….

Moreover, participants recognized that some lenders might be exposed to additional losses:  Delinquency rates on credit card loans, auto loans, and other forms of consumer credit, while still moderate, had increased somewhat, particularly in areas hard hit by house price declines and mortgage defaults. Past and prospective losses appeared to be spurring lenders to tighten further the terms on new extensions of credit, not just in the troubled markets for nonconforming mortgages but, in some cases, for other forms of credit as well….

In light of elevated inventories of unsold homes and the higher cost and reduced availability of nonconforming mortgage loans, participants agreed that the housing correction was likely to be both deeper and more prolonged than they had anticipated in October.  Moreover, rising foreclosures and the resulting increase in the supply of homes for sale could put additional downward pressure on prices, leading to a greater decline in household wealth and potentially to further disruptions in the financial markets."

Remember, this is not a forecast into the future but a press release of minutes from the meeting a couple of weeks ago.   With that said, 2008 will have many homes facing their ARMs adjusting unless they take action soon.  If you have an adjustable rate mortgage with a fixed period ending in 24 months or sooner, please contact your Mortgage Professional.   

Filed Under: Mortgage

What will 2008 bring to the local mortgage industry?

December 26, 2007 by Leave a Comment

20072008

To start with, there will be a significant reduction in those who can legally take  a loan application in Washington.    Effective January 1, 2008, if a loan originator works for a company that is registered with the State of Washington Department of Financial Institutions (DFI), the loan originator must have:

  • Passed their competency exam.  (Most who take it do pass…many are simply opting to not take the test).
  • Attended two DFI approved 3-clock hour courses (one must be on ethics).
  • Renewed their license if it expires by 12/31/2007.

The last stats I’ve heard is that out of the over 15,000 Loan Originators who registered with DFI, fewer than 2,000 have taken and passed the exam.  That’s reduction of just over 85% of Loan Originators working for mortgage brokers in Washington State. 

Originally I assumed that LOs who do not want to take the steps required to work for a mortgage broker, would decide to work for a mortgage bank where they are not held to these standards by the state of Washington.   This is not going to be the case.   After talking with a few of my mortgage banking brothers & sisters, I’ve learned that many banks are "googling" Loan Originators names before hiring and if they were rejected from DFI, the bank sales manager is able to see the nitty gritty details of their disqualification of being a Licensed Loan Originator.   Bank Mortgage Sales Managers also visit DFI’s site and run an LO’s last name to see if they were rejected, withdrawn or licensed.     Add to this equation that there are going to be fewer jobs for Loan Originators with some local banks, such as Washington Mutual, laying off employees and closing some of their retail loan centers.

A majority of the 13,000 or so Washington Loan Originators who have elected not to take the three simple steps I’ve referenced really don’t have a lot of options in the mortgage industry.  Yes, a bank will hire a good producer who has not been rejected from DFI…but there’s only so many of those and no reason for a bank to hire someone who’s a marginal producer.

Let’s also not forget that it’s been an amazing ride for the mortgage industry since August.   Some LOs will decide this job just ain’t worth it.  You really need to know your guidelines and various programs these days and be prepared to forget what you just learned because the guidelines just changed (again) or the program is discontinued.

So after the New Year celebrations pass, if your Loan Originator is still around to help you as your preferred Mortgage Professional, give ’em a pat on the back.  There will be fewer of us left standing when it’s all said and done.   

I personally cannot wait for this year to end and to start new in 2008!

Happy New Years!

Filed Under: Legislation, Mortgage

My Take on the Fed’s Proposal to Amend Reg Z

December 19, 2007 by Leave a Comment

You can read the official press release here.   This following is from the highlights.  I’ve added my opinions (if any) in italic.

The proposal would establish a new category of “higher-priced mortgages” that should include virtually all subprime loans. The proposal would, for these loans:

  • Prohibit a lender from engaging in a pattern or practice of lending without considering borrowers’ ability to repay the loans from sources other than the home’s value.  Fine.
  • Prohibit a lender from making a loan by relying on income or assets that it does not verify.   Fine. I have never been a fan of "over" stated income when the income is not there.  I have done just a few stated income loans in my mortgage career where the income was there, but hard to document.  This will impact those borrowers.
  • Restrict prepayment penalties only to loans that meet certain conditions, including the condition that the penalty expire at least sixty days before any possible payment increase.   Fine.  I’ve never liked prepayment penalties.  Life happens and sometimes people don’t stay in a home or mortgage as long as they originally intended.
  • Require that the lender establish an escrow account for the payment of property taxes and homeowners’ insurance.  Fine.  The lender may only offer the borrower the opportunity to opt out of the escrow account after one year. All subprime (or non-prime, same thing–just sounds better these days) should have reserve accounts. 

The proposal would, for these and most other mortgages (prime aka a-paper):

  • Prohibit lenders from paying mortgage brokers “yield spread premiums” that exceed the amount the consumer had agreed in advance the broker would receive.    A yield spread premium is the fee paid by a lender to a broker for higher-rate loans.    Fine…IF…the borrower accepts and understands that the broker is going to be compensated a total of x% which includes YSP plus the origination if any.  For example, the broker would disclose upfront to the borrower that he/she is going to make 1.25% (just for example sake) to the borrower.  If the borrower is paying 1% if origination points and the lender is paying 0.30% in YSP; the loan originator will credit the borrower 0.05% of the YSP to the consumer.   However, if the reverse happens, and the YSP winds up being 0.20%, shouldn’t the Loan Originator be allowed to increase their origination by 0.05% to meet the 1.25% agreed compensation?  It needs to work both ways. 
  • Prohibit certain servicing practices, such as failing to credit a payment to a consumer’s account when the servicer receives it, failing to provide a payoff statement within a reasonable period of time, and “pyramiding” late fees.  This must be on the servicing side (and it’s fine with me).
  • Prohibit a creditor or broker from coercing or encouraging an appraiser to misrepresent the value of a home.  Fine…absolutely fine!
  • Prohibit seven misleading or deceptive advertising practices for closed-end loans; for example, using the term “fixed” to describe a rate that is not truly fixed.  It would also require that all applicable rates or payments be disclosed in advertisements with equal prominence as advertised introductory or “teaser” rates.   Fine.  I have called 5 year ARMs, ARMs that are fixed for five years and adjust annually afterward.  I don’t see that as misleading.  Consumers should know what the "worse case" payment may be on their ARM or any mortgage.
  • Require truth-in-lending disclosures to borrowers early enough to use while shopping for a mortgage. Lenders could not charge fees until after the consumer receives the disclosures, except a fee to obtain a credit report.  Fine.  I do not provide rate quotes (except for those I post on Fridays with all of my disclaimers) without sending a Good Faith Estimate with the Federal Truth in Lending. 

I am not seeing a huge issue with the Fed’s proposal.  In fact, as you can see, for the most part, I agree with it…it’s fine! 

NOTE:  If you bought a home using over-stated income and have an ARM adjusting, you may need to find a co-signer to help you obtain your next mortgage.  There will not be many (if any) stated or no-income verified products available for you.  This is your government in action.

Filed Under: Current Affairs, Legislation, Mortgage, Subprime Lending

December’s YOU Magazine Now Available

December 13, 2007 by Leave a Comment

This month’s issue of YOU Magazine features the following articles that I highly recommend you check out:

Like Mortgage Market Guide, this is a service that I subscribe to for the benefit of clients.   (I did notice the person who stole my post also copies Mortgage Market Guide and post it as his own…this is a huge no-no and could be a costly one.  If I notice my MMG and YOU Magazine being plagiarized, I may have no other choice than to provide the articles I pay for to those who subscribe only and to remove the links from Mortgage Porter). 

Anyhow…there are other articles available with this month’s YOU Magazine including those for recipes and health tips.   You can read them all by clicking here.

Filed Under: Financial Planning, Mortgage, Recipes

What to do with your turkey left overs?

November 23, 2007 by 2 Comments

Sandwich

Make a sandwich, soup or perhaps enchiladas…sit down, get comfy and read some great mortgage blog articles.  Here are a couple of recent posts that I highly recommend you check out:

HR 3915 – Getting Warmer by Matthew Graham of Mortgage News Daily

What Gas Stations Can Teach Us About Mortgage Brokerages – Part 1  by Russ of Smart Mortgage Advice

Prequalify Your Loan Officer By Asking: "Where Do Mortgage Rates Come From?" by Dan Green of the Mortgage Reports

Honor Among "Thieves" by Gina Gardner of Lenderama

But I Made My Payments by Mike Mueller of Mike’s Minute

7 Things That Have Changed in the Mortgage Industry by Larry Cragun of Real Estate Undressed

Enjoy!

Filed Under: Mortgage, Weblogs

Can I get approved for a 400,000 home loan with a 600 credit score?

November 6, 2007 by 4 Comments

Yes…quite possibly!   The title of this post is a question that was entered as a search that found Mortgage Porter.  Someone could buy a $400,000 home with a 600 credit score if:

FHA Scenario Possibility

  • No late payments or derogatory credit in the past 12 months.  FHA insured loans do not use credit scores.
  • Base loan amount at FHA loan limit (assuming King, Snohomish or Pierce Counties):  $362,790.
  • Just shy of 10% down or a minimum of 3% down plus closing costs with a 6% seller contribution.

With conforming, if the other qualifying factors (income, assets, employment, down payment) are strong, the borrower may still qualify for a mortgage. 

At the very least, if your credit score is 600 and you’re considering buying a home, I suggest contacting a Mortgage Professional to have your personal scenario reviewed.  The higher your credit score, the better your rate may be for a mortgage and a qualified Mortgage Professional should be able to advise you on how to improve your credit rating.

Filed Under: Credit Scores and Reporting, Mortgage
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