My Thoughts on the Future of Home Mortgages and Home Ownership

August 18, 2010 by Leave a Comment

Yesterday, I had the Future of Housing Finance playing in the background as I was working away on rate quotes and lock commitment confirmations for a few of my clients in the Seattle area.  Oh how I wish that I, or a fellow mortgage origintor who has been originating mortgages since pre-subprime days could be on the panel.  Since I'm not, I'm going to share a few of my thoughts on this post.

People who currently have a mortgage and who are credit and income qualified (have made their payments on time) should be allowed to refinance without an appraisal.  This would not only help home owners save hundreds of dollars each month with their mortgage payment, the end benefit would be real stimulus for the economy.

I believe all mortgage originators, regardless of the type of institution they work for, should be held to the highest standards of the SAFE Act.  (Currently mortgage originators who work for banks or credit unions are not licensed).  

I also feel strongly that those who present themselves to be residential mortgage originators (licensed or registered) should not be allowed to also sell real estate.  I'm concerned this has huge potential for fraud and the home buyer is not best served when a real estate agent knows the fine details of the buyers finances.  I view this as a huge conflict of interest.   HUD all ready has this standard: real estate agents cannot originate an FHA insured loan.  I'd like to see this implemented with conventional financing.

Last but not least, not everyone in American needs to or should own a home.   Owning a home is not a right, it's a privelidge that's one's personal financial choice.  And there's nothing wrong with renting a home.  Renting a home, like obtaining a mortgage, is a personal financial choice.  

What are your thoughts? 

Filed Under: Opinion, Rant, Real Estate Agents

Refinancing Guidelines Need to Loosen Up for Housing Recovery

June 15, 2010 by 2 Comments

This subject has been gnawing at me for a while and I’m actually surprised I haven’t written about it here before.  In order for the housing market to really start recovering, I believe that the underwriting guidelines need to relax.  Whoa–you say, isn’t that what got us into this mess in the first place?  Well, I’ll argue that it was more of folks being able to buy more than they could afford (via stated income) that drove up prices and put them into homes where they could never afford the the payments over folks who used home equity by consolidating debts or doing who knows what with the cash (hopefully they banked it…in a safe place).

Helping someone keep their home by taking advantage of the lower interest rates prevents a foreclosure or short sale.  Yes, we have the Home Affordable Refinance Programs (HARP) thanks to President Obama–but many don’t qualify and many who do are not taking advantage of this temporary program.   FHA Streamline refinances now require an appraisal OR no closing costs can be financed–how is that better for American home owners during this time? 

If it were up to me, I would make it possible for home owners who have demonstrated they pay their mortgage and debts on time and who have documented steady employment to have their appraisals waived and closing costs financed so they don’t have to dip into their hard earned savings to finance their refinance.  Now this does happen sometimes with Fannie Mae’s HARP program…but not with Freddie Mac (which requires an appraisal and limits closing costs) and not with FHA.

Why penalize home owners who’s property values have plummeted because their neighbors sold their homes via short sale, lost it due to a legitimate foreclosure or plain walked away from their obligations?  Why punish home owners who have been making their payments and who qualify on every other point EXCEPT the appraised value?  If their payment is being reduced, it helps stabilize the neighborhood and reduces the risk of default for the mortgage servicer.  Loan to values need to be eliminated on rate-term refinances where a tangible benefit for the home owner exists.

We also need to eliminate the securitization factors of when Fannie or Freddie bought the existing mortgage for it to be eligible for a HARP refi.  I recently had a client where it showed on Fannie Mae’s site that he indeed has a mortgage owned by Fannie Mae–it was not until we received an error message trying to underwrite it through DU (the automated underwriting system) that we called Fannie Mae to discover that the loan had been securitized (purchased by Fannie Mae) one day too late to qualify (March 1, 2009).  This person’s loan closed in December 2008, was sold the the bank and then took months for Fannie Mae to purchase.  This means this upside-down home owner does not qualify to reduce his payment by $250 per month.  Imagine what the $250 a month would do for him and/or the economy.  It gives him some probably needed monthly financial wiggle room and he just might spend a little more which helps our economy too.  (Loans need to be purchased/securitized by Freddie Mac no later than May 31, 2009 to qualify).

These are just a few thoughts that have been a bee in my bonnet… or worse!   Don’t get me started on home owners with existing mortgages that have private mortgage insurance hitting a brick wall when trying to do a HARP refi (most pmi companies are not cooperating) or not being able to include second mortgages (even “purchase money”) in a HARP refi.   Or how FHA insured loans will soon be more expensive for borrowers seeking to refinance or purchase with the increase of the annual mortgage insurance premium.

Please contact your elected officials in Congress if you have had issues with obtaining financing…they are making originating loans tougher and tougher as I write this post. 

I’m afraid it’s going to get worse before it will get better.  Many people who need help and who would qualify for the refinance with exception of the appraisal…are not able to get it.  Many don’t want to risk the cost of the apprasial (around $500) to attempt a refinance in these economic times.

Filed Under: Rant, Refinance Tagged With: , , ,

Who Does Your Loan Originator Really Work For?

June 8, 2010 by Leave a Comment

Photo credit Sarah G... via flickr I often wonder how a consumer can truly trust a mortgage originator who sits in a housing development or a real estate office.  Yes, it's convenient when you're checking out that new home and the loan originator that works with the builder or real estate company just happens to be sitting there waiting for you or the next person who'll walk through their door.  Is that the best option for you?

HUD is questioning this with regards to builders with in-house lenders and if this arrangement is a RESPA violation.  It is harmful to consumers if the closing costs or rates are increased to compensate for what the lender may have to shell out to be that builder's preferred lender. Often times, you may find that the builder has built any cost to bribe you to work with their lender by increasing the sales price of the home.  RESPA violations aside, I've always felt that if you work with the builder's lender, you're providing your personal information to the "seller" or the more specifically, the employee of the seller.   The loan originator may be employed by a bank, but when they're constantly fed by the builder…where do their loyalties rest?

I feel the same way about loan originators who work as "joint ventures" with real estate companies.  They may be paying rent inside your real estate agent's office or just be on their preferred providers list with some sort of business arrangement.  I believe most of the big real estate brokerages in the Seattle area have an arrangement made to steer you to their lender, title or escrow company.   When a loan originator, title rep or escrow officer are constantly fed or partially owned by a real estate company–where are their loyalties?  If you only want to get approved for a $400,000 sales price, and can afford to much higher–do you think the LO who's shacked up with the real estate agent will let that agent know when they press the LO for more info on you?

Yes, you pay for their origination, title or escrow fees, but who are these people really work for.  Shouldn't you have more of a choice?   Some real estate agents will tell you that there isn't much difference in rate or fees–which they may truly believe; however, it may not be accurate. 

I "work for" Mortgage Master Service Corporation.  I'm paid by the consumer when we close a mortgage transaction together.  My business is dependent on my clients referring me to people they know who need a mortgage in the greater Seattle area.  I also have clients who find me from reading my blogs.   I am not part of any joint venture or arranged business agreements.  I'm not paid based on volume, quotas or selling a certain type of program.

Bottom line as a borrower in one of the largest transactions you may ever make in your lifetime, it is your responsibility to make sure you have the right team working for you.  Do as much research as possible before you've entered into a real estate contract.

Photo credit:  Sarah G… via Flickr

Filed Under: Escrow and closing, Mortgage, Opinion, Rant, Real Estate Agents

If the Bank doesn’t charge an “overage or points”…what do you call this?

March 29, 2010 by 4 Comments

It really gets my goat when I see statements on the internet that are intended to lead the consumer to believe that someone or some institution is better than someone else…especially if the comment that is being spewed seems misleading to me.

Just a few moments ago on Twitter, a mortgage originator from Bank of America posted:

Bank of America DOES NOT CHARGE OVERAGES/POINTS to close Home Loans. Building trust with our customers is #1!

Her “tweet” also included a link to an article from Jack Guttentag which has me a bit riled and I’ll probably address soon in a separate post.  [see update below].

Bank of America has changed their compensation program for their mortgage originators. It’s my understanding the mortgage originators are rewarded based on the volumes they originate.  (I have serious concerns on how this is better for the consumer). This will continue to happen with banks and I believe that DFI is in the process of trying to do the same with mortgage originators who are licensed in Washington State.   A consumer might assume that due to the tweet above, they’re paying less for a mortgage rate and perhaps should select this mortgage originator and/or the bank she works for.

I decided to check out Bank of America’s website to price a rate based on the same criteria I used this morning.   Their rate for a 30 year fixed mortgage in Seattle was not only 0.125% higher in fees, it’s also 0.125% higher in RATE than what I quoted hours ago.

BOA_fees

This clearly states 1.125% in points to be paid for a 30 year fixed at 4.875%. (click on image for a larger picture).

UPDATE:  Here’s Jack Guttentag’s definition of an overage, per the article the Bank of America mortgage originator tweeted about:

It is the difference between the price a lender posts with its loan officers — which is the price the lender expects to receive — and the price the loan officer charges the borrower. If the posted price is 5 percent and zero points, for example, and the loan officer charges the borrower 5 percent and half of a point, the half-point is the overage

Perhaps it’s an overage only if the mortgage originator is compensated the gain?  What if it’s the bank who’s gaining the overage–is it okay to have the consumer pay more then?  Banks are…well…banking it.

Consumers need to continue to be aware and to be responsible for their personal financial interest.

Filed Under: Rant

My “Ideal” Home Purchase Time Line

December 18, 2009 by 3 Comments

Previously I reviewed HUD's Home Purchasing Time Line, which I found several issues with if you're a home buyer in Washington State.  If I'm going to pick something apart, it's only right that I offer an example of how I think it should be corrected.

Below is HUD's suggested time line.

HUDTimeline

Here is how I see a successful purchase transaction evolving.  My modifications to HUD's time line are in blue below.

Mortgageportertimeline

Rhonda Porter's Ideal Home Purchase Time Line   

Step 1: Determine what you can afford. Make sure you really consider how much home you can personally afford (not just how much home you qualify for or what a lender tells you).  Please do not stretch yourself to be "house poor".  Keep in mind the lessons that this economy is teaching all of us.

Step 2: Shop for a mortgage pro. Oh how I wish that instead of a shopping cart for rates (which is a moving target) and fees on page 3 of the new Good Faith Estimate, that it had a place for you to "shop" your mortgage professional instead.  Perhaps a place where you could compare resumes and available products instead of focusing so much on rate and fee.  The person who will be guiding through the process of obtaining one of the largest debts you may have in your lifetime should not be selected so casually.

Step 3:  Choose the best loan for you.  After selecting your mortgage professional; he or she should consider your financial goals and help provide you with information to allow you to make an educated decision on which mortgage program best suits your goals based on what you currently qualify for.  You need to know what your total payment will be and how much money will be required for your down payment and closing costs BEFORE you start looking for your next home.

Step 4: Find a real estate agent.  I recommend asking friends and family members who have recently purchased or sold a home and interview them.  If you need a recommendation for one around the greater Seattle area, please ask me!

Step 5: Shop for other service providers.  This has to happen BEFORE you prepare an offer on your next home assuming your lender permits you to shop (this is per RESPA guidelines–not a control freak mortgage originator).  If you select your own title and escrow service provider, there is no cap to how much their fees can change at closing.  If you use the providers from the mortgage originators preferred list, the accumulative fees at closing cannot exceed 10% from the good faith estimate.

Step 6: Find a home and negotiate contract terms.  Now you can start searching for your next home with confidence since you know what you can afford and you have your home buying team assembled.

Step 7: Have house inspected.  I recommend this even if your home is new construction.  I can tell you a few stories…but this post is all ready getting too long!

Step 7.5:  Shop and select your home owner insurance provider.  Do not wait until closing to do this.  Home owners insurance rates can vary and your credit score will impact your insurance rate.  Also if the home has a history with certain insurance claims, there could potentially be issues that are better to be aware of early in the process.

Step 8: Loan is processed.  Once we have a signed around agreement, your loan is processed and various services are ordered or set up.  This is also the time to review you lock options to determine whether you want to commit to an interest rate or float (not lock). 

Step 9: Loan is approved.  The loan approval may come back with conditions.  This happens after the underwriter reviews what has been submitted to them during the processing period. 

Step 10: Do the final walk through. 

Step 11: Go to settlement.  Prior to your escrow appointment, I recommend that you obtain a copy of your estimated HUD-1 Settlement Statement 1-2 days in advance so that you have time to review the final figures.  Be sure to let your mortgage professional and escrow officer/settlement agent know that you expect this as the lender will need to provide your loan documents to the closing company a few days earlier than "the norm".  The same is true if you want a complete copy of your loan documents to review prior to your signing appointment.

Step 12: Move in!  Yay–this can be such an exciting time!  Typically there may be a few days between signing your closing documents and moving into your new home. 

Filed Under: Disclosure Forms, Good Faith Estimate, Mortgage, Opinion, Rant, Residential Purchase

Always Read All of the Fine Print

December 9, 2009 by Leave a Comment

I've been noticing at my bank a new promo offering "1% mortgage cash back".  My husband has enjoyed teasing me saying stuff like "why would anyone use you?"  And when he was at the bank branch, he asked a mortgage-teller if this was legit they replied something along the lines of "yeah, isn't this great!"

Today I received my monthly bank statement and sure enough, stuffed inside was an advertisement for the "1% mortgage cash back.  The bold print states that "you will receive 1% of your principal and interest payment back each year!"

But it's the fine print you need to read…by the way, the fine print takes up about 30% of this add…you really have to read everything word by word.  In the middle of the print, I found what I was looking for:

"There is a $500 calendar year cap on the principal reduction and cash back amount…"  and by the way, you must have (or get) a checking account with this bank in order to get up to $500.

And it get's better…when I priced out a refinance scenario based on excellent credit, a $400,000 loan amount and a home valued at $500,000; I was quoted 0.25% higher in rate than what I would offer today on a 30 year fixed rate (4.625%/APR 4.777).   Serious.   That bank is making pretty darn good change on that extra quarter point in interest while giving the consumer back a maximum of $500 per year.

In my opinion, this is a terrible way to potentially trick consumers into thinking they're getting back much more than $500.  To me, 1% of your mortgage sounds like 1% of your loan amount and with this promo, it's not.

A quarter point interest rate difference on a $400,000 loan amount will pay you about $60 per month or $720 a year!  Not to mention interest paid over the life of the loan.

My advice, work with someone who can offer you a more competitive ratedon't chase a bad gimmick from a bank.  

Filed Under: Mortgage, Rant

From the Junk Mail Bag

August 10, 2009 by Leave a Comment

Seems like junk mail from random mortgage companies are on the rise again.   I recently had a client who I helped with a home purchase utilizing an FHA mortgage send me a piece of junk mail that he had received from a company (NOT Mortgage Master) that bothered him beyond the typical "deluge of refi offers from firms who's marketing strategy is to look up public records for a targeted mailing".

Some mortgage originators will buy list of home owners who have a specific type of mortgage, such as FHA, where they can offer a streamline refinance thinking if they use your originating mortgage companies name enough times, they just might fool someone into calling them. 

This piece of mail junk has many red flags that home owners should be aware of.

Letter 007

There is no return address on the mailer anywhere.  You have no idea who you will be calling or if they are even approved to do business in Washington State.  I would never contact a mortgage solicitor if you have no way of researching them first.

They are also miss-using HUD's logo in the upper right corner as if it is there own.  This is a big time no-no that I'm sure HUD would be interested to see.

There is no APR to go along with the rate and the small print on this doozie must be too small for my old eyes.

It is true that FHA streamline refinances do not require an appraisal (therefore you are not proving equity) and assets are not verified either.  However the scenario still needs to qualify and HUD frowns about this type of marketing.

The eligibility for a streamline FHA refinance DOES NOT EXPIRE.  This is a weak attempt to try to create a "call to action" to the home owner.  HUD or lenders couldchange guidelines that would have an impact on an FHA streamline refi. 

Oh by the way, IRRL is a term used for VA "streamlined" refinances–not FHA.

What really pushed my clients button was the outside of this mailer garbage.

DSC_0171 

Another attempt to make this look like it came from Mortgage Master and a nice little threat as a bonus to really make sure you don't disregard their efforts.

I've written about junk mail before many times at Mortgage Porter.  You are welcome to forward this type of crap to the local officials.  They do not want consumers mislead or taken advantage of either.  

As a Washington State home owner, or if you're receiving mail from a mortgage company in Washington State, you can forward mail that you feel is misleading to DFI:

Enforcement Unit, Division of Consumer Service

DFI, P.O. Box 41200, Olympia, WA 98504

A letter like this should also be forwarded to HUD.

I strongly recommend not selecting your mortgage professional by what randomly lands in your mail box.  

Filed Under: FHA, Predatory Lending, Rant, VA Mortgage Loans

Geithner one of People Magazine’s 100 Most Beautiful?

May 1, 2009 by Leave a Comment

Nope…we're past April 1st…this is no joke and I'm sorry BUT I do not find anythingGeithner about this man "beautiful".   During an interview yesterday on CNBC, a representative from People Magazine said that some people are beautiful "on the inside". With that, I agree. 

I admit that I do not personally know our Treasury Secretary, Mr. Geithner.  Maybe he is a beautiful person….who only paid past due income taxes because of his new political position.   

I typically only read People Magazine when I'm in a doctors office.

UPDATE:  This explains everything!

Filed Under: People, Rant
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