My New Blog

 We have one lender offering very low rates on 5/1 ARM loans.  (as low as 4.5%).  The lending guidelines for this loan are the same as those for Fannie/Freddie 30 year fixed rate mortgages.  However, if your time horizon for staying in your home is short, there can be significant savings with this loan.  If you think you are interested, please call or email me.  I do not recommend this loan for most of you. 

There is also available a loan for those of you with acreage, and even "farm" or "ranch" land only loans.  The rates for this type of financing are pretty high (8% range) , but there was no financing available for quite a while prior to this announcement. 

 Warm regards

Shelby

503-819-6545 (direct)

We heard today that the New "Making Home Affordable" program will begin accepting applications next week.  We now have more definitive guidelines, which follow, and we are told, are subject to change as the program is rolled out:

The loans will be sold to either Freddie Mac or Fannie Mae (there are some guideline differences), so you may hear these referred to as the "Freddie Mac Relief Finance Program" or the "Fannie Mae Relief Plus" program. 

 1.  These are Rate and Term refinances of your existing first mortgage only.  There is NO cash out allowed to you, but you may roll your closing costs and pre-paids into the loan.

 
2.  These loans are designed to reduce your current interest rate and in the Fannie Mae version, and must lower your current monthly payments.  They can replace current loans that are Adjustable rate loans, interest only loans, and balloon payment loans. 

 3.  Loans that are not currently eligible include:

•      Government secured loans (FHA, VA, Rural Housing USDA)
•      Loans with Mortgage insurance*
•      Non-prime loans (such as sub-prime, or stated income loans)
•      Reverse Mortgages
•      Second Mortgages
•     *Loans with Mortgage insurance may be included at a later date, but are not eligible on the first roll out.

4.  The maximum Loan to Value ratio is 105% (This does not include the amount of an existing 2nd mortgage)

     For example:  Your current 1st mortgage is $100,000 balance

                             Your current 2nd mortgage is $25,000 balance

                             Total owing on the house is $125,000

                             If the house appraises at $96,000, you are eligible for the refinance because the amount you are refinancing is  less than 105% of the appraised value.     

5.  Property types that are eligible include:

• 1-4 unit dwellings
• condominiums
• Coops
• PUDs (planned unit developments - homes with a Homeowner Assoc.)

6.  Occupancy - There is a difference between the occupancy allowed for Freddie Mac loans and Fannie Mae loans.

For all Fannie Mae loans, regardless of the size of the dwelling, at least one unit must be owner occupied.  For Freddie Mac loans, some investment properties will be eligible, however, the number of refinances you are eligible to receive is limited.

 7.  Credit scores - this one will surprise you I think

     Freddie Mac program                               

     No minimum credit score unless new payment is 20%  more than existing payment - then minimum score of  620 required (pmt may increase for a neg am or interest only loan)

    Fannie Mae Program - no minimum credit score required.

8.  Maximum Debt ratio

     45%                                                                                                           9.  There are no cash reserves required for either Fannie Mae nor Freddie Mac loans

 10.  Adding new borrowers or removing old borrowers is determined by the loan program and can differ.

 11.  Appraisal Options

       A new appraisal may not be required.  This will be determined on a case by case basis - depending on factors such as location, type of property, and type of current loan.

12.  Documentation required for the refinance

       This can also differ depending on whether it is a Fannie Mae or Freddie Mac loan.  In some cases, stated income may be allowed.  In all cases, be prepared to sign an authorization allowing your prior years tax returns to be pulled by the lender prior to closing.  If you are stating income, and your prior years tax returns do not support the income you are stating, your loan will be cancelled. 

 13.  Mortgage insurance will NOT be required!!

     Remember - these loans are designed to get you into a loan that better suits your needs.  You can refinance into another Adjustable rate mortgage if your timeline for staying in the property is shorter than the term of the ARM.  However, most loans will be 30 year fixed rate loans.  If you currently have a negative amortization loan, or are paying interest only on your current loan, this refinance may actually increase your current payments, but is designed to prevent you from going into payment shock when your current loan resets. 

 Other news today:

• Mortgage rates remain at historic lows, while the stock market just had its best ever monthly gain in history. 
• The Case-Shiller index showed that housing values lost the most in the last 12 months, than in any other 12 month period since this record started being kept.  The cities hardest hit included Phoenix, Miami, and San Francisco. 

However, we need to keep in perspective that the above report was for the period ending January 31, 2009.  A LOT has happened in the last 60 days that makes this news not as relevant.  For example, sales were UP for both new and existing homes in February.  While the value may have been lower, this is a good sign that value hunters are out, and perhaps a bottom is forming over value drops.  We HAVE to sell off the old inventory for the market to truly stabilize. 

 Forclosures surged 29.9% in February, after rising 17.8% in January.  It is now estimated that 1 in every 440 homes is in some state of foreclosure right now. 

Please call if you would like more info about the Home Affordable Guidelines - I know that some of you will qualify for this loan. 

 I have heard from several of you about your efforts to get your current loans modified.  Many are expressing extreme frustration at being given the run-around by your lenders.  However, I have heard one very good success story - one of you did manage to get your loan modified to very acceptable terms - Congratulations.  This is very good news. 

Keep thinking positive thoughts. 

Warm regards,

 Shelby

503-819-6545

The Feds met this week, and, as expected, did not raise the overnight lending rate.  However, of more interest to the mortgage and consumer markets is that the Feds are now buying US Treasury Bonds and Mortgage bonds, rather than putting them out on the open market.  At least $750 billion will be purchased by the Federal Reserve system over the next 6 months. 

The net effect of this announcement, and these purchases is that mortgage rates DROPPED this week to lows we haven't seen.  There are lenders out there with 30 year fixed rate mortgages as low as 4.625%**

I've often been asked why rates differ among lenders.  There are so many factors that determine the rates lenders charge, but here are some reasons:

1.  How much cash is the lender holding now that they want to invest in mortgages?  The more cash they have the lower their rates are likely to be.

2.  How busy is their staff?  Do they have staffing capacity to accomodate all the applications?  If they are understaffed, or have more loans to process than they can close in a reasonable period of time, they will raise rates to discourage applications.  (When rates dove yesterday morning, lenders are telling us that they received a record number of new applications yesterday than on any day EVER before.)

3.  LOCATION LOCATION LOCATION - Even if you qualify for the best rates, based on your credit scores, cash reserves, and equity position, the best lenders out there may not want to finance your house, or will charge you a higher rate based on your property.  If your property is in an area defined as "adverse market," where property values are falling faster than other areas, lenders may decline your loan, or charge you higher rates because they are concerned about the value of your house - not just today, but 6 months from now.  As an example, some parts of Clackamas county have been much harder hit by this recession than Washington or Multnomah County because these areas were overbuilt during the boom times resulting in excess inventory now. 

4.  Some lenders are more conservative than others.  They want only the best of the best loans.  They may offer lower rates, but decline more loan applications if you don't fit their parameters. 

This is why it pays you, as the consumer to shop around for loans. 

So- what should you do if you own a house in an adverse area and want to take advantage of low rates to refi now?  or you want to purchase in one of these areas to take advantage of the very low prices?  This depends on your goals and time horizon.  Remember that markets go in cycles.  One area may be an adverse area today, but was booming 2 years ago, and may be booming a year from now.  So, your time horizon is a big factor.  Will you stay there 10 years?  Do you love the house?  Is this the best house you can find for your budget?  If it costs you 1/8% more to buy this house, than one in another area, should you pay that 1/8% more? 

1/8% will cost you approximately $5-$8 more per month per $100,000 loan balance!  That's just a little over 1-2 cups of Starbucks coffee. 

I am often asked if rates will drop more.  I wish I had a crystal ball and could answer that question for you, but no one knows right now.  The Feds are certainly doing all they can to drive rates down to stimulate the housing market.  Of course, we are all hopeful rates will drop further.  Time will tell. 

As always, please feel free to call or email if you have questions that affect you or someone you know personally.  I'll be happy to discuss your situation with you. 

Enjoy your weekend.

Warm regards,

Shelby

503-819-6545 (direct)

shelby.tnc@comcast.net

**This rate does not include closing costs - APR varies with loan amount and lender, but averages 4.815%.  These are short term locks and require full packages pre-delivered to lenders to qualify.

The big news this week is the loud uproar over AIG paying their "top producers" $165,000,000 in bonuses! After AIG led us into this recession, and have taken $185 billion in taxpayer dollars, they have recently paid their top executives, most notably those that began the credit default swap fiasco worldwide, $165 million dollars! The whole world is watching to see how this is handled, and waiting to see if we get that money back. However, these bonuses were paid, per contracts negotiated years ago. The executives who received the bonuses are those who understand how this whole CDS system worked, so they are likely the most capable of unwinding it. Still - most of our Congress, President Obama, and even analysts on the financial new stations, want this money paid back to the taxpayers - immediately. Stay tuned.

Other depressing news is that Oregon is still reeling in unemployment. In this state, we are losing jobs at the rate of 775 jobs per day (81,800 in the last 12 months). Unemployment now stands at 10.8% at the end of February, while the national average is 8.1%. It is yet to be determined where we are in the national standings, but last month, Oregon had the 5th highest unemployment rate in the country. Believe it or not, Nebraska is highest! But Nebraska is where many banks and insurance companies have home offices, so that should not be so surprising.

Other surprising news this morning is that housing permits and starts were UP last month, primarily in multi-family housing, such as apartments, condos, and townhouses. This is the first month that number has been up in quite some time - but everyone is reluctant to say this is the signal that we are starting to see a housing recovery. Still, there are optimists out there who believe we may see the bottom of the housing market by early summer. That would be good news indeed, for everyone. Single family home construction has yet to see any increase in activity, but that is due to the huge inventories out there, in new housing, foreclosed housing, and people wanting to move for other reasons.

Mortgage rates are holding steady at near the **5% mark, even as the stock market is showing some signs of coming back to life. This is because the feds are still buying up mortgage bonds, trying to keep our rates down, and trying to loosen credit. We have seen more up days than down days in the DOW Jones average over the last week and a half - so hopefully this trend will continue. Some stocks, like Citibank and B of A are up 100% from their lows of just 2 weeks ago. Don't you wish you had seen this coming? The increases in bank stock values are due to early reports from a few of the big banks reporting their earnings are up for the first quarter - to date - this year. Some Wall Street analysts are skeptical and wary of these early reports because most banks don't do their write downs (specifically in housing valuations) until the quarter has ended. I hope this doesn't mean the market will dive again! Oil prices are creeping higher, as precious metal prices are falling.

The Feds are meeting this week, though rates cannot be dropped any lower than 0% - .25% for overnite lending rates to banks. But the feds comments after the meeting, which should be annouced sometime around noon tomorrow, could move the markets.

President Obama has pledged a $275 billion rescue program to help as many as 9 million homeowners with their mortgages. However, the moratorium on foreclosures has not occured, and the modification program tied to this rescue takes many months to work through the system. We are hearing that the volume of requests is so high that modifications can take as long as 8 months to complete, from the date of initial application.

Again, as a reminder, for those of you underwater, but not qualified for the hardship modifications, the program allowing you to refinance is supposed to begin as early as April 4th.

Let's all dance and chant for sunshine and warmer weather sometime soon.

Best regards,

We received more clarification today on this plan.  Remember that these processes are for owner occupied properties  - at least on the initial roll out.

 1.  If you are unsure if you qualify for the loan modification, you have to call your lender to find out.  Be aware that millions of people called their lenders yesterday, and were unable to get through, or were on hold for potentially hours.  But your only source to find out if you qualify is your lender.  It is expected that perhaps only 1 of every 9 homeowners will qualify for this modification. 

2.  If you are underwater but not under financial hardship, and your current mortgage rate is higher than the going rate, or if you have an ARM that has recently reset or will reset soon, refinance transactions will be available for you.  (Other situations may qualify as well - please call or email if you have a different situation and have questions.)  The Treasury department is still working on the details about how to handle the undervalued portion of your loan, and what risk based pricing adjustments (if any) might apply to you.  So, we are not yet taking applications, but will be soon.  We have one lender already committed to helping.  If you would like to pursue this avenue, and would like to get an application going through me, please let me know as soon as possible.  We expect a lot of applicants, so the process could be lengthy.  You should start getting your paperwork together now to speed up the process when lenders start accepting applications.

 What we will need - at a minimum:

1.  paystubs for all applicants that show year to date information, and can verify at least 30 days employment (this should be your most recent paystub)

2.  2 months current bank statements - all pages

3.  copy of your drivers license and social security card

4.  w-2 for all applicants for 2007-2008

5.  tax returns for 2006-2007 (2007-2008 if you have already filed for 2008) if you are self employed or are claiming non w-2 income (such as rental income, 1099 income, etc)

6.  IRS, retirement plan statements (most recent)

7.  copy of face page of your homeowners insurance policy (or name, address, phone number) of your insurance agent.

 We have also learned today that some banks are now offering to buy homes from borrowers who do not qualify for either modification or refinances at the current values.  This is to eliminate the foreclosure on your credit report, and to save the bank the cost of a foreclosure.  At this point, we are hearing that this primarily applies to those whose incomes have dropped so much (or who have lost all income except unemployment) and cannot qualify to carry the loan at any rate. 

Please call or email if you need clarification or have any additional questions.

Regards

Shelby

The details are being rolled out for the housing modification bill, as promised.  While many of the features are as expected, and what we announced earlier this week, there are a few surprises.

 This modification bill is intended to save up to 9 million households from going into foreclosure.  Your current lenders are being offered incentives to modify your current loans, if you qualify.  To qualify you must

• be able to demonstrate that your current payments are a financial hardship
• be able to produce income documentation to support your claim of harship
• hardship must be due to decrease in income or increase in payment (or some other validatible form of hardship)
• loan amount cannot exceed 105% of the value of your home
• these modifications apply to owner occupied dwellings only - rental and commercial properties do not qualify, unless you live in one of the units of a multi-unit property (up to 4 units)

Loan balances eligible for this assistance have been increased to the levels that were available during the 2008 Economic Stimulus plan - you will have to call your current lender to see if you qualify - ANd you may start calling as early as today.

 FHA loan limits for the Portland metro area have been increased up to $418,000, effective immediately.

Here is something new - there is another component to this bill that is still under discussion.  The Treasury is looking at ways to help those of you who are underwater, but not under financial hardship, qualify to refinance your current mortgage.  We have at least one lender that has already announced to us that if this bill is passed, they want to participate - so help may be on the way for those of you with rates much higher than prevailing rates who have been unable to refinance yet.  I know who many of you are - and believe me, I will let you know as soon as I do, if this becomes a possibility. 

 The one thing I cannot emphasize enough is to keep making your mortgage and credit card payments, if you can, as long as you can.  Your credit score has never been more important. 

Warm regards

Shelby 

Happy March!!  Daylight savings begins next Sunday morning.  Hopefully with longer days and more sunshine, everything will look rosier, and maybe we'll even see the news turn better too.

 Rates are about where they ended up Friday - right around the 5% level for 30 year fixed rate mortages - give or take 1/8% - 1/4%, depending on the lender and other mitigating factors. 

 The details of the Obama proposed "housing modification program" are set to be released this Wednesday.  We are hearing that there is a lot of resistance to this bill, both from Republicans and fiscally conservative Democrats as well.  The loan modification portion of the bill seems to be ok with most, but the balance reduction portion may not be passed.

What we have heard to date is that most people will NOT qualify for this loan modification program for the following reasons:

 1.  You can be underwater a maximum of 5% - or looking for a new loan at 105% of the appraised value of the house.  Most people are more underwater than 5% - especially since housing values, on a nationwide average, are now at late 2003 values.  Since the average family moves every 3-5 years, this means most loans were originated AFTER late 2003, and the majority of the population paid more than the house is now worth.   

 2.  If you obtained your mortgage in the last few years, AND you have reasonably good credit, odds are that you were never asked to produce proof of income or assets.  Pretty much anyone with good credit was able to get a mortgage based on that good credit - and probably with the ability to show at least 2-6 months payment reserves.  This modification package requires that your loan was "full doc" meaning that you produced income and asset proof.  If you did not produce that proof, regardless of your willingness to do so, you do not qualify for the government program.

 3.  The maximum loan amount available for modification is a conforming loan ($417,000 or less).  While this does not have a huge impact on us here in Oregon and and southern Washington, it does affect anyone who owes $417,000 or more on their home, regardless of equity or value of the home. 

 On a brighter front, I am hearing from our inhouse attorney that he is making some headway in negotiations on at least one of my own client's modifications.  He does have the lender communicating, and is providing more paperwork to substantiate the requested modification.  I'll keep you posted as this progresses.  Remember, this is not an overnight process.  The banks do NOT want to write down rates (I do not understand this - isn't it better to write down the rate and keep the loan a good loan, than to see the loan go to foreclosure?)

It is expected that loan modifications will remain a viable alternative, whether through the government program or through a private attorney, for the remainder of 2009.

If working with a local attorney who you can meet and talk witg, is important during this process, I'll be glad to get your paperwork going, and get your modification in process at your earliest convenience.

So - what's happening with the credit card companies and all the rate and fee increases?  I'll cover this topic in tomorrow's post.

Enjoy the rest of your day.

Warm regards

Shelby