Mortgage Buybacks and How It Impacts You

May 13, 2010 by Leave a Comment

I was invited by Amtrust Mortgage to hear a presentation by Jackson Nafziger on "A State of the Industry Update".   My biggest take away from yesterday's event in Seattle was the huge amount of buy backs (aka repurchasing) of loans that are taking place.  A "buy back" is when a lender is forced to repurchase the loan from Fannie Mae or Freddie Mac typically because it's not performing.  It's reported that in 2009, over $30 billion in troubled mortgages were repurchased.   From 2008 to 2009, this is an increase of 320%!   According to the seminar, Bank of America/Countrywide, led the buy-back pack in 2009 followed by Chase/Washington Mutual, Citigroup and Wells Fargo. 

If you're considering a mortgage to purchase or refinance home, be aware that it's a different process than it was just a few years ago.  I still help people obtain financing on their homes every day.  My point is to be prepared for more paperwork (even the Good Faith Estimate has gone from 1 to 3 pages) and tougher underwriting guidelines.  

What can you do to help improve your mortgage process?

  • Select your mortgage professional and get preapproved early.  This allows you to create a game plan, if needed, such as working on your credit or funds for closing.
  • Be prompt in providing documentation or information that your mortgage professoinal requests.
  • Be prepared for the process to take possibly take a little longer.  Everything is being scrutinized from your bank statements to your appraisal.

The mortgage loans that are being originated today are of a much higher quality than recent years past. 

If you have a question about today's mortgage process or are interested in a home loan for a property located in Washington, I'm happy to help.

Filed Under: Fannie, Freddie and FHFA, Mortgage

Dear HUD

May 11, 2010 by Leave a Comment

The 2010 Good Faith Estimate was created to protect consumers and allow them to have a meaningful tool for selecting a lender.   This GFE has been very controversial and an interesting challenge for all of us to adapt to.  I've done my best to embrace it since my only other choice is to find a new career.   HUD has been fairly responsive with issuing many FAQs to help us better understand their intentions and to guide us with this document. 

Here are three suggestions I would like HUD to consider when they issue their next RESPA FAQs:

Allow adding an address from a TBD (preapproval) to become a "changed circumstance".   Currently a home shopper may have a challenging time having a mortgage originator provide a GFE without a property address as adding an address does not constitute a "changed cirmcumstance".   HUD does not prevent a LO from providing a GFE in this case, however they do warn that if a LO does indeed provide one, they're doing so at great risk.  A "changed circumstance" is what allows a LO to re-issue a Good Faith Estimate, without a qualified "changed circumstance", we're violating RESPA.  A mortgage originator who issues a GFE without the property address is currently on the hook for fees that exceed the tolerances.  

This is why LO's are offering "work sheets" instead of GFEs for home-shoppers.  Yet a majority of the third page of the Good Faith Estimate is all about shopping lenders and the home buyer cannot effectively use the document for this until they have a purchase and sales agreement.  In my opinion, this doesn't leave you much time for selecting the professional who will be assisting you with one of your largest debts and assets.

Treat the owners title insurance premium the same as you do excise tax/transfer tax.   If it's customary for the owners title policy to be paid for by the Seller, do not require to have it disclosed on the Good Faith Estimate.  In Washington State, this is not the case.

Yesterday, I was reviewing my GFE for the second time on a 1 million dollar purchase and I just caught that I forgot the seller paid owners title insurance policy fee of $2,000 on the GFE.  It was a simple error that would have meant that I would be out those funds (which would benefit the Seller–not the buyer).  It's the first time I've come that close to forgetting to add that fee…I am human and I'm hearing of other fellow mortgage professionals who are having to eat that fee.  

In addition, the owners title policy fee makes our closing costs look much higher than what they truly are.  It really makes no sense disclosing a fee a buyer does not pay AND to have a mortgage originator responsible for a fee that has nothing to do with the proposed mortgage.

Forgiveness when a mortgage originator makes a human mistake.   Mortgage originators across the country are having to pay for the seller's title policy or the FHA upfront funding fees (2.25% of the loan amount) if they issue a Good Faith Estimate making an honest mistake.  I'm not talking about a slime-ball LO who's doing "bait and switch"…I'm talking about an exception for when and if a human mistake was made. Most mortgage originators are not paid enough to pay for a 2.25% funding fee mistake…there's not that much revenue in our income.   Perhaps this could work with a time limit, such as 1-2 business days?

Dear HUD, if you're listening…I'm doing my best to adapt to the 2010 Good Faith Estimate.  I think these three tweaks would be helpful for consumers and mortgage originators alike.  April 2, 2010 was your last revision to the FAQs, I'm hoping your next revisions will address these issues.

Filed Under: Good Faith Estimate

Happy Mother’s Day

May 9, 2010 by Leave a Comment

 Scan0001
I let you guess which one is me.  Happy Mother's Day.

Filed Under: Just for Fun

West Seattle Community Garage Sale Day is Today!

May 8, 2010 by Leave a Comment

WSgaragesale If you love rumaging through garage sales, you’re in for a treat.  The West Seattle Blog has organized the 6th annual West Seattle Community Garage Sale with about 200 homes participating.  Click the map for a updated printable version.

They couldn’t have picked a nicer day for the sale with sunny skies and temps in the upper 60s.

This event is today only, May 8, 2010, from 9:00 am to 3:00 pm.  Come on out to West Seattle, visit the garage sales and stick your toes in the Puget Sound along Alki.   Have a great day!

Filed Under: Current Affairs, Just for Fun, Seattle

Insanity

May 6, 2010 by 1 Comment

I'm working on renegotiating a locked rate for one of my clients.  The lender will allow us to do so if it meets specific criteria (price and rate must improve by a certain amount).   If I'm successful in obtaining a lower rate for my clients, I may potentially cause a delay in their transaction due to the Mortgage Disclosure Improvement Act (MDIA).  Most lenders interprets MDIA as any change in APR, for better or worse, of more than 0.125% for a fixed rate mortgage.

So I'm requesting an interest rate improvement of 0.125% because the transaction meets the criteria to do so.  If the lender approves the request, I am required to provide a new Federal Truth in Lending which will disclose the APR lower by 0.126%.  This will trigger a three day waiting period before my client can sign their mortgage papers at closing.  Luckily, the clock starts on the day of delivery (unlike the right of recession waiting period) and includes Saturdays.

Along with the Federal Truth in Lending, I am required to provide a revised Washington State's Loan Application Disclosure Form (no beef from me there) disclosing the change in interest rate.

Isn't it crazy that improving an interest rate for my client could possibly trigger a delay in closing? 

Filed Under: Legislation

Free Workshop for King County Marine Waterfront and Bluff Property Home Owners

May 1, 2010 by Leave a Comment

The King Conservation District is holding a series of free workshops for property owners along the marine shorelines and bluffs of King County.    The workshop will provide an opportunity to learn about the ecological, geological and vegetation management issues associated with owning a home located on marine waterfront or a bluff.

Topics will include:

  • Understanding marine near-shore and riparian ecology
  • Recognizing geologic hazards
  • Using native vegetation to reduce erosion and to improve fish and wildlife habitat

Who should attend:

  • Beach property owners interested in a stable natural shoreline
  • Bluff property owners interested in reducing the potential for erosion and landslides
  • Any marine shoreline or bluff property owner interested in improving fish and wildlife habitat.

When and where:

All workshops are from 9:00 am – 12:30 pm (indoor session) and 12:30 – 3:30 pm (optional pre-order boxed lunch $12 and field trip).

Facilitators:

  • Kollin Higgins, King County DNRP WLRD
  • Peter Landry, City of Normand Park
  • Elliott Menashe, Greenbelt Consulting
  • Brandy Reed, Conservation District

To register or for more information contact Brandy Reed at 425-282-1924 or brandy.reed@kingcd.org

Filed Under: Events, Real Estate, Seattle

Poll Results: How Would You Like Your Mortgage Originator Compensated?

April 30, 2010 by Leave a Comment

Surveysays

Our poll is over and I’m actually a little surprised by the results: a majority prefers the current most common form of mortgage originator compensation.

Points, based on a percentage of the loan amount received 48.9% of the vote.   Followed by hourly, based on work performed, at 31.1%.  Paying your mortgage originator a flat fee, the same fee for everyone, came in last at 20%.

I hope the FED and Washington State’s DFI reads this… right now they’re both trying to change how mortgage originators are paid. 

Shouldn’t it be up to the consumer?  They have the right to vote with their feet.  If they don’t like how a mortgage originator feels they should be compensated, they can walk.

Our government getting involved with how an industry is paid is very troubling to me.  

Your thoughts?

Filed Under: Polls Tagged With: , ,

How to Buy a Seattle Home with $10,000

April 28, 2010 by 2 Comments

NOTE: Mortgage rates quoted in this post from April 2010 are outdated and no longer valid. For a current mortgage rate quote for a home located anywhere in Washington, please click here. Also, other programs available since this post was published. 

I recently had someone getting ready to buy their first home ask me if $10,000 would be enough for a down payment.  If she had served in the military, she could possibly qualify for a zero down VA loan; this was not an option for her.  USDA loans also offer 100% financing but the area she’s considering is not classified as rural. 

An FHA loan will currently allow her to buy a home with as little as 3.5% of the sales price.  Until this summer*, sellers can contribute up to 6% of the sales price towards allowable closing costs and prepaids (*in a few months, this will be reduced to 3%).

So how much with $10,000 buy?  How about a sales price of $285,000.   Here’s how that pencils out.

$285,000 x 3.5% required minimum down payment = $9,975.  This is the buyers minimum required investment if utilizing an FHA insured loan.   A parent can gift funds towards this amount, but the seller cannot.

The rate (as of writing this post 4/28/2010) for an FHA insured 30 year fixed mortgage is 5.000% assuming we’re closing in 30 days (APR 5.620) and priced with zero points to help keep the closing costs down.   Pricing the loan with zero points means that you’re asking the seller to contribute $2,750 less than they would if your rate was priced with a point (1% of the loan amount).  This may make your offer more acceptable.

Based on this scenario, if the Seller contributes $5,500 towards allowable closing cost and prepaids, you’ll wind up needing approximately $10,000 for your down payment and remaining closing costs.

I did use 6 months for property taxes, which will vary depending on when your first mortgage payment is due.  And I used 15 days of prorated interest which is based on closing in the middle of the month.   Closing towards the end of the month reduces the prorated interest (your cost)…of course the trade off is that you don’t own the property until it’s closed.

The total monthly payment, including PITI and mortgage insurance, is going to be around $2,000 (depending on interest rate, taxes and home owners insurance).  My scenario has a payment of $1981.  

In addition to your down payment, you may be required to have reserve funds after closing of at least two months proposed mortgage payments.  Based on this scenario, that would be around $4,000 in the bank (stocks, 401k, etc) after closing. 

Also of note, your first payment will not be due until the month after closing unless you close on an interest credit.  This is a great opportunity to “pay yourself” by putting that mortgage or former rent payment into your savings account.  Owning a home does come with expenses…some not always planned.

If you are interested in buying a home located in Washington state, I’m happy to help.   Please contact me or apply on-line by clicking the tab at the top this page.

Filed Under: FHA, First Time Home Buyer, Residential Purchase Tagged With: ,
« Previous Page
Next Page »