Survey Says – CONDO!
by The Buzzz on Feb.03, 2010, under The Buzzz Blog
This has happened to me more than a number of times now so it is important I bring it to your attention. Here is the scenario:
I am working with buyers looking to do a 10% down loan on a town home. Every time I write a pre approval letter I speak with their real estate agent, “Are you sure it’s a townhome and not a condo? Do they own the land underneath?” This can be a major issue and there are developments with both town homes and condominiums and typically even the town homes are condos in these developments.
He assures me it’s a town home. The listing agent calls and wants to be sure I can close the deal because they have had problems closing loans in the development (another blog possibly).
“Of course, what were the previous issues? Are you sure it is a town home?”
“Yes”
Okay. Time to order the appraisal. My appraiser looks at the plat map and public records and guess what? It’s a condo. Borrowers do not want to put the down payment required for a condo.
I tell the agents it’s a condo. So the selling agent calls the builder as he doesn’t believe me. It’s a condo. Time to switch to FHA. Yes an FHA condo loan in 2010. Fortunately it’s approved by HUD and I can close the loan.
Now this is a three story unit (btw sold in 2007 for 725K now 325K OUCH!). I get it. If I were a real estate agent I would call it a townhome. If I lived there I would call it a townhome. But when a lender asks you what the property is you should probably know that it’s a condo.
This always seems to pop up. Whether you are an agent, or a buyer, or a seller, know your town homes and know your condos. Your transaction depends on it, and if you feed the financing guy misinformation we all could be wasting time.
Very Truly Yours:
LittleFish
FOMC Statement released – here is the recap
by The Buzzz on Jan.27, 2010, under The Buzzz Blog
The FOMC Statement has been released. Here is a recap
FED REAFFIRMS PROMISE TO KEEP RATES EXCEPTIONALLY LOW FOR AN EXTENDED PERIOD
FED REPEATS EXPECTATION THAT MORTGAGE BACKED SECURITIES, AGENCY DEBT PURCHASES TO BE EXECUTED BY END OF Q1
SWAP ARRANGEMENTS WITH CENTRAL BANK COUNTERPARTIES WILL CLOSE SWAP ARRANGEMENTS ON FEB 1
FED SAYS WINDING DOWN TERM AUCTION FACILITY, FINAL AUCTION TO BE ON MARCH 8
HOENIG ONLY DISSENT IN DECISION ON POLICY ACTION; BELIEVED CONDITIONS CHANGED, LOW RATE, EXTENDED PERIOD VOW NO LONGER NEEDED
ECONOMIC ACTIVITY TO STRENGTHEN, DETERIORATION IN LABOR MARKET ABATING
HOUSEHOLD SPENDING EXPANDING AT MODERATE RATE, CONSTRAINED BY WEAK LABOR MARKET, TIGHT CREDIT
INVESTMENT IN STRUCTURES STILL CONTRACTING, BUSINESSES RELUCTANT TO ADD TO PAYROLLS
BANK LENDING CONTINUES TO CONTRACT, BUT FINANCIAL CONDITIONS SUPPORTIVE OF GROWTH
PACE OF RECOVERY SEEN MODERATE FOR A TIME, FED ANTICIPATES GRADUAL RETURN TO HIGHER RESOURCE USE
FED SAYS WITH HIGH UNEMPLOYMENT, STABLE INFLATION EXPECTATIONS, INFLATION LIKELY SUBDUED FOR SOME TIME
The initial knee jerk reaction is HIGHER INTEREST RATES
The 3.375% coupon bearing 10yr Treasury note is -0-04 at 97-27 yielding 3.638%.
The FN 4.0 is now -0-02 at 97-28 and the FN 4.5 is -0-02 at 100-28.
Stocks have not budged. The S&P is still -0.50% at the all important 1086 support level. That pivot point is obvious in the chart below….
HERE IS THE TEXT:
Release Date: January 27, 2010
For immediate release
Information received since the Federal Open Market Committee met in December suggests that economic activity has continued to strengthen and that the deterioration in the labor market is abating. Household spending is expanding at a moderate rate but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software appears to be picking up, but investment in structures is still contracting and employers remain reluctant to add to payrolls. Firms have brought inventory stocks into better alignment with sales. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.
With substantial resource slack continuing to restrain cost pressures and with longer-term inflation expectations stable, inflation is likely to be subdued for some time.
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter. The Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets.
In light of improved functioning of financial markets, the Federal Reserve will be closing the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility on February 1, as previously announced. In addition, the temporary liquidity swap arrangements between the Federal Reserve and other central banks will expire on February 1. The Federal Reserve is in the process of winding down its Term Auction Facility: $50 billion in 28-day credit will be offered on February 8 and $25 billion in 28-day credit wil be offered at the final auction on March 8. The anticipated expiration dates for the Term Asset-Backed Securities Loan Facility remain set at June 30 for loans backed by new-issue commercial mortgage-backed securities and March 31 for loans backed by all other types of collateral. The Federal Reserve is prepared to modify these plans if necessary to support financial stability and economic growth.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that economic and financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted.
Appraisals in the Year 2010!
by The Buzzz on Jan.22, 2010, under 1 The Buzzz Season 2
I realized after one of my recent blogs – THESE REAL ESTATE AGENTS ARE NUCKING FUTS, that not many agents or sellers or buyers know what a lender asks from an appraiser. Its easy to point the finger at the appraiser and call him an idiot but I have found that when we do have a low appraisal many of the comps I get from agents don’t qualify as they are too new, too far away, etc.
So I asked lenders for guidelines and reviewed with a couple appraisers and made this…ENJOY!
FHA Tightens up in 2010
by The Buzzz on Jan.20, 2010, under The Buzzz Blog
As promised in late 2009 the Federal Housing Administration is changing tightening its guidelines in an effort to strengthen its capital reserves which are dangerously low.
FHA Commissioner David Stevens had this to say:
“Striking the right balance between managing the FHA’s risk, continuing to provide access to underserved communities, and supporting the nation’s economic recovery is critically important,”
“When combined with the risk management measures announced in September of last year, these changes are among the most significant steps to address risk in the agency’s history. Additionally, by continuing to provide affordable, responsible mortgage products, FHA will support the housing market’s recovery. Importantly, FHA will remain the largest source of home purchase financing for underserved communities.”
Changes include –
1. MIP being raised from 1.75% to 2.25%
2. 580 Fico and up requires 3.5% down and less than 580 fico = 10% down. (Currently few lenders accept anything below a 620 but there are 1 or 2 that accept 530 and up so this may not be too significant).
3. Seller concessions go down from 6% to 3%
The main change that would affect borrowers is the increase in PMI. Literally 100% of the borrowers I have closed on an FHA transaction have financed the MIP. This basically will increase the loan amounts $500 per $100,000, and raises the payment $2.76 per $100,000 based on a 5.25% interest rate.
As a Loan Officer I was pretty upset to hear that FHA guidelines were tightening. “Isn’t that all we have left for what seems to be at least 50% of the First Time Buyers out there?” was my first thought. These changes are understandable considering the hardships HUD has suffered with the rest of the industry and considering they will actually insure a loan for someone with a low fico and little money. We as real estate professionals should be thankful.
While I don’t like the fact we can no longer get a six percent seller concession the truth is most sellers stop at three to four percent anyway on these transactions. While the 2.25% is not great news for home buyers taking advantage of FHA, at least it will be financed into a low interest 30 year loan (currently).
PERHAPS THIS WILL HELP GET MORE BUYERS OFF THE FENCE AND INTO HOMES BEFORE MORE GUIDELINE CHANGES COME OUT!
LittleFish
Here Comes Another Bubble v1.1 – The Richter Scales
by The Buzzz on Jan.16, 2010, under The Buzzz Blog
This is a classic video showing the bubble of social media – is the prediction true?
Dobro and Garrick Go To an Estate Sale
by The Buzzz on Jan.14, 2010, under 1 The Buzzz Season 2
This is the first video I put out with little educational value however, Dobro is just funny and this was extra footage from our REO episode so I made it a “bonus video”. I hope you laugh!
THESE REAL ESTATE AGENTS ARE NUCKING FUTS!
by The Buzzz on Jan.08, 2010, under The Buzzz Blog
This year I received my first accepted offer on January 1st! What a great way to start the New Year! Yahoo! Right?
The borrower is a great guy, met him though my website and looking in a heavy REO saturated area. The property is owned by a real person who has been in the home for ten years. The buyers fico is lower, (below 600) and the deal is FHA, tough but doable, I have the DU approval ready to go.
When we get accepted the real estate agent, with whom I have never worked with, calls me right away asking about the appraisals and the comps in the area etc. He tells me we need a good appraiser as they need to understand the comps in the area. “No worries, it’s FHA, I can have one of my people go out and appraise the property.” I tell him and I order the appraisal.
I get a call this evening from the appraiser, “Where did they get that price… all homes that are selling in that range are twice as big???”
I tell the selling agent working with my client and he mentions an estate sale that is not on the MLS, similar property, $50K more. I tell the appraiser. She says “That is a transfer of title from the bank to Fannie Mae – the property foreclosed and Fannie had to take back the loan. Yes, title transfer but no one made an offer on the property.”
The selling agent tells me “Find another appraiser!”
“Fine, give me a name and a number” I reply.
“I only have a name” he says.
“Give it to me I will look her up right now” says I, the LittleFish.
I look her up via Google. Number disconnected. Not on the OREA site.
So then I Google his name and the first thing that pops up is not his LinkedIn page, nor his Facebook profile but an article from a newspaper that reads as follows…
“The victim, whose name has not been released, attacked {MY CLIENTS AGENT} with a pool cue, bashing {MY CLIENTS AGENT} over the head, police say. {MY CLIENTS AGENT} allegedly attacked with a knife, stabbing the victim multiple times.”
I have no idea if this is the same guy but his name is unique and if the property doesn’t appraise I am definitely worried for the appraiser!
Then I speak to the listing agent. He basically took the listing and listed high to cover payoff and the commission fees and seller credit. The selling agent put my buyer in the deal knowing the property wouldn’t appraise on an FHA deal with 3.5% down as he mentioned right away the value issues.
So these two yahoo agents are out there taking listings and writing offers that cannot close for WHAT!?!?!?!
Since we as Mortgage Pros have to deal with MDIA, HVCC, GFE 2010, and hundreds, yes literally hundreds, of other guideline changes etc. in the past 16 months why are real estate agents able to do whatever the hell they want without any consequences to them?
If an agent wants a pre approval letter why don’t they have to submit the request with 3 sales in the area – if declining market 2 within 1 mile – 1 within 90 days to show the deal will actually close?
Right?
Thanks for reading this I really needed to vent!
I will say that to say this – I owe many real estate agents a lot and they do a great job. I somehow feel like they are the minority however. Perhaps I am too and that’s the issue.
Garrick “LittleFish” Werdmuller
A Prospect Looking for a Home Loan in Alameda asked where will rates be in the Summer of 2010???
by The Buzzz on Jan.05, 2010, under The Buzzz Blog
She liked my answer so much I decided to blog it…
We know interest rates will be going up soon. How soon and how much are the big questions. There is still no consensus on when the Fed will begin to increase rates. The majority, but not universal, expect the Fed to begin increasing rates by Q3, that would suggest markets will begin anticipating this by moving up rates in late Q1 or early Q2. The other “majority” is hanging to the belief that the Fed will not move up rates until the end of the year or early 2011. This is built on the foundation that the Fed has never increased rates until employment begins to improve and isn’t likely through the first half of the year. Whether the feds moves up rates or not, the housing market itself is going to move rates higher. If we look for just one keystone for the economy its the housing sector; and that is not as positive as some believe. The housing market and the commercial markets have a steep hill to climb this year.
My personal prediction is the conforming 30 year will be somewhere between – 5.25 and 5.625 – you heard it hear first! Lets see what happens.
You can also use my Rate Tracker at www.garrick.biz
