Posts Tagged ‘Obama’

To continue from last week when I was telling you about the ill’s of the HVCC. This means that the appraiser no longer has the time or desire to do the research to make an educated assessment of value. This is not the independent appraiser’s fault it is just simple economics. Our government was on the right track when the HVCC was developed. They were trying to stop collusion by the involved parties to a transaction. And in my opinion they almost got it right. The problem is the independent appraisal companies are having trouble getting appraisers to accept the fee and therefore, are having trouble getting the local appraisers to do their appraisals. So they bring in an out of area appraiser who doesn’t have the time nor desire to figure out the accurate value figures for a subject property. Both the National Association of Realtors and the Mortgage Broker Association have lobbied to get the HVCC rule changed but up to now, no one in Congress or in President Obama’s cabinet appear to be listening. What is the solution? Change the rules of HVCC to set the fee that the third party provider can charge for referring an appraisal out and give the bulk of the fee where it rightfully belongs, to the appraiser. I agree with regulation to prohibit another meltdown but stopping the process by muddying up the process is not the answer.

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The Department of Housing and Urban Development or HUD has launched a new program to help with job creation through a series of grants. Armed with 150 million dollars provided by Congress the entity that is overseeing the project is the Office of Sustainable Housing and Communities or OHSC. According to HUD, W-2 employed households are still feeling financially pressured. According the Department of Labor, January saw the first unemployment decline in over a year to 9.7%. While it is a decrease we are still close to the historic highs. In addition, HUD has determined that the average household spends half of its monthly wage on housing and transportation. What this all means is the OSHC has been set up to help the average homeowner. The new office will provide grants to metropolitan planning organizations, state governments and non-profit organizations to improve access to affordable housing. It will also invest in energy efficient homes and buildings and put emphasis on energy efficient retrofitting for new home purchases. What does all of this mean? It means that President Obama is trying to make good on his promise to improve our economy through housing subsidies. Whether this plan will have any significant impact to the average home owner remains to be seen.

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Happy New Year to all of you, I wish I was starting the first blog of the year with better news. I sat in on a panel of mortgage industry experts earlier this week and we all came up with the same conclusion. The U.S. government and large banks (B of A, Wells Fargo, Chase etc) are trying to run brokers and small bankers out of the mortgage business. HUD’s proposed a new rule for Full Eagle mortgage lenders net worth requirement is set to increase from $250,000 to 2.5 million. This will effectively eliminate all but the largest mortgage companies. In addition, HUD wants to eliminate the Mini Eagle or correspondent program all together. This will make the lender responsible for approving correspondents, brokers, or licensees. What this does is effectively run the broker and small banker out of the FHA market. Why? Supply and demand. The large Banks will get to choose who they do business with. Who will they choose? A broker network where they have to give up a portion of their profit to the brokers or their in house branches where they keep all of the profit. My bet is the latter. What will this do to the consumer who wants an FHA loan? It will force him/her to accept the fees, points and processing time that is given by these few lenders. In effect a monopoly will be achieved and it will drive brokers from the market and cease all real competition. I am a firm believer in survival of the fittest but I also believe in consumer rights. If HUD’s proposal does get passed then the only loser will be (as usual) the little guy. I recommend you email your congressman or President Obama and let them know that this proposal cannot be passed.

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I was asked yesterday what a deed in lieu of foreclosure was and is it a good alternative to a short sale? A deed in lieu of foreclosure is where a homeowner contacts his/her respective mortgage company and essentially deeds the house back to the mortgage company before the mortgage company forecloses due to non payment. A short sale is when a homeowner finds out what the market price is for his/her house, usually with the help of a realtor, and if the value of the home is less than what is owed they try to sale the home on a “short” of value “sale” or short sale. The lender that is carrying the paper has to agree once an offer comes in which usually takes about 2-4 months. Which one is better? For times sake it is the Deed in Lieu of foreclosure. But for liability sake it is a Short Sale. When a lender agrees to a short sale they almost never go after the homeowner for the deficiency or loss incurred by the lending institution. With a deed in lieu, the homeowner opens themselves up to a possible deficiency judgment that forces the homeowner to take the left over debt with them and pay it off over time. President Obama is supposed to introduce legislation that will make it impossible to get deficiency judgments against homeowners who short sale their properties.

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Let’s talk about short sales. The definition of a short sale is to sell a home short of what is owed to a lending institution thereby making them lose money. Short sales are used when a home owner decides that their property is no longer worth what they paid for and they don’t want to go into foreclosure with their lender. The homeowner will list their property with a real estate agent who, upon receiving an offer, negotiates with the lender to get them to accept a deficiency on their loan. As you can imagine lenders are not fond of losing money so they fight with the agent and homeowner to not accept the negotiated price. It is up to the agent to prove the deficient value and up to the homeowner to show that they can no longer make the payment. This process is a lengthy one and can take up to 6 months, even more in certain situations. But this is a far better alternative than foreclosure for all parties concerned. The homeowner gets to stay in the house, sometimes without payment, the agent makes a commission, and the lender gets the property back damage free. President Obama, HUD, FNMA, FHLMC, and most servicing company believe that this is a WIN/WIN for all concerned. So why is it this not the preferred method for upside homeowners to dispose of their properties? Simple, most lenders are stuck in the old REO (real estate owned) days where the homeowner is foreclosed on and physically removed from the property by law enforcement. I will compare the two methods of home transfer, REO vs. Short Sale, next week.

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It has come to my attention that there is a bill that has been floating around that congress is calling for the banishment of Yield Spread Premium or YSP paid to Mortgage Brokers. YSP is the fee that a lender/bank pays a Mortgage Broker to either do a certain volume of business or sell a certain interest rate. While this may seem a good idea up front, as usual, Congress has missed the mark. I believe that there does need to be YSP regulation, but prohibiting the payment to brokers is only going to make the consumer pay more to get their financing. Instead of a consumer paying 1 point in origination they will have to pay 2 or even 3 points to get a deal done. Not to mention the fact that the banks and lenders who do not have to disclose YSP are immune to the regulation because they are not required to disclose YSP on a Closing Statement. What it amounts to is President Obama’s big plan for regulation in the mortgage market is being put solely on the Mortgage Brokers and very well could lead to more fees to the consumers. And once again the “little guy” will get squeezed while the big banks laugh all the way to Wall Street.

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Mortgage rates remained constant for the third week in a row. These low interest rates have been holding steady for the last three months. At the Federal Reserve’s policy meeting that was held on September 23rd, Chairman Bernanke told the media of the Feds plan to hold its benchmark interest rate “exceptionally low for an extended period”. The 30 year conforming interest rate is around 5.25% APR. FHA 30 year rates are not that far behind with rates around 5.625% APR. This means that the Fed is committed to doing its part to see our economy pull out of this recession. President Obama has said earlier that he expects unemployment to rise from the August rate of 9.7% until the end of the year, but during the first quarter of 2010 our country should start to see unemployment hold steady and start to reverse its course. I hope they are right.


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If you are a first-time homebuyer now would be the time that you should be putting in your offer on your first home. Why now? There are a number of reasons that I will explain. One, President Obama’s $8,000 tax incentive ends at the end of November and it doesn’t appear that he will extend the deadline. In order to qualify you must be a first time home buyer or not have owned a home for the last 36 months and you need to close by the end of November. Most real estate closings are done within 45 days so you need to find a house soon in order to take advantage of the incentive. Two, mortgage rates are at their lowest levels in months and are close to their 30 year lows. FHA, VA and Conventional loans can be used to qualify. Three, Home prices are at their lowest levels since the early 90’s. Four, Fed chairman Ben Bernanke said today that he believes that the economy is on the road to recovery. If you don’t act soon you may miss the opportunity.

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To refinance or not to refinance, is this weeks topic. With current mortgage interest rate trends the way they are I thought it was important to write this weeks blog about the benefit of refinancing now as opposed to waiting for a month or two. It doesn’t matter if you have an FHA, VA or Conventional loan, now is the right time to refinance or streamline your existing loan. Most economic indicators show that we are starting to pull out of this recession. With President Obama’s reappointment of Fed Chairman Ben Bernanke it is obvious he feels our economy is on the right track and the Fed Chairman is doing a good job. With an improving economy, inflation looming and a reappointed Fed chairman, can a hike in the Fed Funds rate be that far behind? No! I believe that by the first quarter of 2010 our economy will have improved to such a degree that the Fed will see inflation as a threat and raise the discount rate thus raising our mortgage rates. I know that this is all very confusing but it is safe to say that interest rates are near an all time low. So why gamble?

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