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The S & P Case Shiller report was released yesterday for housing sales in the 20 largest metropolitan areas. 

The bad news is that home values are still falling nationwide, and ALL 20 cities show value declines since July 2007 (when the housing bubble popped.)

The areas that showed the greatest losses are still Miami and Las Vegas.  In general, the sunbelt cities have been hit the hardest by this downturn.  The sun is actually shining more brightly on the Pacific NW where Seattle and Portland are among the cities least affected by the housing downturn. 

Charlotte, ND   -.1%

Dallas, TX - 3.4%

Denver, Portland -4.7%

Seattle, WA -4.9%

In fact, Portland showed an increase in values of .74%.  Does this mean that Portland has hit bottom?  One report for one month does not mean that much.  We would have to see increases for several months to conclude that we are in fact at the bottom.  And, there are still builders out there with huge inventories they want and need to sell - so great values exist.  Unfortunately, as builders "give away the farm," they are bringing down the values for all of our metro area. 

Also, it should be noted that the Case Shiller report is based on median prices of homes sold in any period of time.  It could be that for April (top spring selling season), more expensive homes were sold than in March. 

The one positive trend noted in the report is that prices are declining at a slower pace than in prior months, so perhaps the bottom, for Portland, is closer than we think. 

We all know that closing costs for a mortgage are HIGH, but did you know that closing costs for a refinance transaction are much higher?  Why?  and is there anything we can do to change this?

1.  In a purchase transaction, the seller pays some of your escrow and title costs.  This helps reduce your closing costs. In addition, it is not uncommon for a buyer to ask the seller to contribute more of the closing costs, in exchange for a slight increase in the cost of the home.  Lenders still allow this, as long as the house appraises for more than the buyer is paying (including closing costs,)

2.  In a refinance transaction, of course, there is no seller to help out.  So, escrow costs in particular, are much higher.  But, in addition to the usual closing costs, the client must also pay required "escrow, impounds, or reserves" towards payment of future taxes and insurance.  Here's the catch.  Your current lender is already holding "reserves" towards those future tax and insurance bills.  But, under current law, this lender is allowed to hold those reserves for up to 30 days after your loan is paid off. They can use your funds, interest free, for 30 days!  Then they send you a check for the impound account balance they were holding.  In the meantime, your new lender must collect these "reserves" again.  As the borrower, you must either come up with cash for these reserves, or add these funds to your "closing costs" and new loan amount.  (First of all, these are NOT closing costs.  These are funds YOU need to pay YOUR bills.)  But more important, adding this amount (sometimes several thousand dollars) will increase your loan amount, increase your payment - AND worst of all, could cause you to NOT qualify for the loan you want because it increases your debt ratio, and your loan to value ratio. 

Is there a solution?  While our good senators are busy arguing about consumer protection and changing all the mortgage laws, perhaps they could add to all their rhetoric, a requirement that your current lender MUST subtract your current reserve balance from your current loan payoff amount?  Why not write your Congressional respresentative today and ask that these changes be included in the new rules they are making.  Links to find and write both your Congressperson, and Senator are provided below.

www.house.gov/writerep

www.senate.gov/contacting/index.cfm

This is important people.  You never know when you might need or want to refinance your property.  This could affect YOU!

Warm Regards

Shelby

This is a hard question to answer because, in all honesty, after the run up in rates, even after the housing crisis hit us last year, I was surprised to see rates fall to the lows they hit again in 2008. 

But, here's what I'm seeing lately. 

We are still seeing extreme volatility in mortgage pricing.  Mortgage rates are tied, for the most part, to the pricing and yield on the 10 year Treasury Bond.  When the pricing drops, and the yield rises, we usually see mortgage rates rise as well.  Historically, Bond prices usually move contrary to the way the stock market is moving.  When stocks are down, investors "flee to the safety of bonds," so bond yields drop. 

We are seeing some different influences at work lately.

1.  We are told that there are trillions of dollars on the sidelines waiting for some type of stabilization of the economy and the markets.  So, while the markets are volatile, they do not swing as wildly as they did before all this money withdrew based on economic news. 

2.  Good news still drives stocks up, and visa versa - but not 400-500 points in either direction.  And, sometimes, bad news does not cause the market to drop at all.  This is because there has been so much bad economic news in the last year, that much of the bad news is not unexpected anymore and has already been "built into the pricing."

The trends I am noticing in the last few months are that we are seeing higher lows, and higher highs - which signals to me that mortgage rates will continue to move higher for the near future.  Each time the rates move higher, they move very much higher, as in this morning.  In early May 2008, we saw rates for the 30 year fixed rate mortgage as low as 5.625%.  In spite of all the fluctuations recently, we haven't seen that rate again.  Eary last week, we saw the best rate at 5.75%, but while we had a rate pullback this week, we haven't seen 5.75%.  But today, we are seeing 30 fixed rate up around 6.25% - 6.375% on basically the same bond yield we had last week.  It seems there are other influences driving rates, in addition to the bond yield and pricing. 

I am trying to find out what those influences are, but in the meantime, we continue to see tight credit, with ever increasingly difficult guidelines to meet in order to qualify for a mortgage. 

Still, I believe we must keep this all in perspective.  A rate of 6.25% is a very low mortgage rate historically, AND, it is a very low rate internationally.  I have searched, and cannot find a single country lending at the rates available in the United States. 

Stay tuned for more updates.

Warm regards

Shelby

I think that most of you realize that a real estate loan, whether residential or commercial, is not an easy process.  By the time you have furnished all the required documentation to the lender, some of you will ask if we would also like your first born son? 

I've often said, smiling, that by the time we're finished, I'll know everything personal about you, except the size of your underwear. 

Seriously, this is not an easy process.  In the not so distant past, getting a loan, especially if you had good credit, was almost as easy as signing your name.  Your good name and good credit got you almost anything you could want.  Sadly, those days are gone.  Yes, "stated income" loans are still available from a few lenders, but you, as the borrower, pay a very much higher rate for that privilege, and you must have very good credit.

Since the decline of home values, lenders are very concerned about being able to sell your mortgage to either Fannie Mae or Freddie Mac (how many of you knew about Fannie or Freddie a few years ago?  How many of you knew, or even cared, that almost all mortgages are sold?)  Prior to the decline, there were investors of every shape and size.  Mortgages originated in the United States were sold worldwide.  Most of us don't have a clue who actually owns our mortgage.  We know only who services the loan. 

 Because our home values were increasing in value so quickly, investors weren't concerned about defaults.  They knew the housing market was so hot that if anyone defaulted, selling the home could be accomplished faster than a foreclosure could, or would take place.  Welcome to 2008.  House vacancies stand at an all time high.

Lenders and investors do NOT want to see a foreclosure.  They could actually LOSE money on your loan if you don't keep your payments current now.  So, we've gone back to the days when you must have good credit, you must document your income and assets, you must have a recent appraisal (with a lender approved appraiser), and frequently an appraisal review by the lender....... and, at the discretion of the underwriter, you might be required to provide even more information and documentation.  The process is not only cumbersome, it's exhausting for some borrowers.  You give us all the paperwork I ask for, and then the file is submitted.  The underwriter can, and usually does, come back and ask for more. 

We used to be able to close a good loan in 2 weeks.  Now, we are lucky to close a good loan in 30 days.  More often we are looking at 45 days.

The process is exhausting and frustrating for me too. Fortunately I have been in this business for quite some time.  I have long established relationships with appraisers, escrow officers, lenders, underwriters, etc.  Those relationships do help get us through this process.  There are times when I can go back to an underwriter, for instance, and beg for mercy.  Don't laugh.  Sometimes, it can actually help. 

As always, I will always put forth my best effort for each and every one of you.  I will try to make the process as painless as possible. 

I wish you all the best.

Warm regards

Shelby

That's a hard one to call, and is very much dependent on who you listen to.

In the Portland metro area, we were one of the last areas to feel the huge escalation of housing prices, relative to other large metropolitan areas in the country.  Conversely, we were also one of the last areas to feel the drop in housing values when the "bubble burst."  However, with all the national headlines and media blitz about the housing bubble burst, it was only a matter of time before we felt it in Oregon as well.  So, following this logic, will we be one of the last areas to see a recovery? 

Logically, Portland is very well positioned for a recovery as early as, or even earlier than many other metro areas.  Our foreclosure rate is low, our employment is strong, and we still have a large influx of people into our beautiful state.  Unfortunately, the media does not broadcast our strengths, but rather focuses on the economy nationwide.  It is my opinion that the media escalates problems, rather than reporting good news. 

Nationally, and even worldwide, there are issues, other than housing, that are keeping the housing market in crisis.  The rapid escalation of oil is at the forefront of all issues.  This alone is reducing disposable income for everyone.  It has been reported on CNBC, Bloomberg, and almost all other national news, that the current oil crisis is due mostly to supply and demand.  However, just today, CNBC reported that Saudi Arabia is releasing an extra 3M barrels of oil into the world supply, but there are few takers.  Does that sound like a "supply and demand issue?" Of course, I don't have all the answers. 

As a mortgage loan officer, I do know that most buyers in this area are still waiting for housing prices to bottom.  Unfortunately, this mentality just perpetuates the problem.  If buyers don't start buying, how can we see the recovery we all want?  There are some "killer good deals" out there right now.  The inventory has never been higher.  Buyers can pick the "perfect house" without pressure of making quick decisions.  Rates are still historically low, albeit extremely volatile.  But, it has been 20-40 years since we've seen rates under 6% (except during the housing boom.)  Economists nationwide have already forecast that when the recovery gets into full swing, we will likely see rates rise.

Lots to think about as we move into a holiday weekend.

Should be a good weekend to go house shopping.

Enjoy your holiday.

Shelby 

We may not hear much about it these days, with politics, earthquakes, credit crisis, economic downturns, etc., but ID theft is still happening.  I see it all the time.

When you decide you want to buy a house, or refinance the loan on your current house, it is almost too late to start looking at your credit for the first time in months or years.  You need to be monitoring your credit report ALL the time.

As a Loan Officer, I see new or updated credit reports all the time.  I see ID theft probably at least once a month, if not more often.  ID theft is one of the hardest things to prove and get removed from your credit report, especially if it has been there for longer than 60 days.

Because Creditors are writing off so much bad debt, and because ID theft has been an issue for a few years now, some credit card companies, in particular, will not honor your claims of ID theft if a debt has been outstanding against you for more than 60 days.  If you have not been monitoring your credit, you may not know about this problem during that time frame.  Here's an example:

I personally have been a victim of ID theft several times, but one time I didn't know about it for 6+ months.  I had moved from Maryland to Oregon in the 90's.  One credit card company sent me those blank checks along with a pre-approved credit application, with a credit limit of $15,000!  Since I had moved many years earlier, the mail was not forwarded, but someone completed my application, and cashed the checks. 

Of course, the bills were sent to my Maryland address - so I never saw them.  When the creditor turned my very delinquent account over to a collection agency, that agency did find me - and the phone calls started.  It took 6 months to get that debt removed from my credit report and my scores restored, and I know how to work with credit.  Now I have credit monitoring.  If that were to happen again, I would know immediately that someone had opened an account in my name.  I could go to my credit monitoring company and file a dispute, and it would be handled for me.  That peace of mind is well worth the $10 a month I pay for this monitoring and protection.

Do yourselves a favor and sign up for a credit monitoring service.  I highly recommend the service that Costco offers, if you are a Costco member.  If not, most banks now also offer a similar service.  Check with your bank to see how to sign up.

Please be very careful if you choose one of the internet based companies.  My understanding is that the monthly charges are much higher (after the first FREE report), and that most do not report scores that coincide with the scores that are reported to us in this industry.  Some of these companies do not check all 3 bureaus, and that is critical.  Also, if you sign up with one of the bureaus, such as Equifax, you will get only Equifax information.  Often, collection agencies, and companies such as wireless companies do NOT report to all 3 bureaus, so you still might not know all you need to know to protect yourself.

As always, if you have questions about this blog, or any other information on this website, please feel free to call at any time.  I'll be happy to help any way that I can.

Warm regards

Shelby

Recently, Fannie and Freddie, and the FHA all introduced strong loan pricing adjustments based on what they call "risk based" pricing.

Everyone has known for some time that borrowers with better credit scores get better rates on almost everything.  But, with the recent credit crisis, most lenders have taken this process to a whole new level - one that makes pricing a loan a much more involved process.  Basically, this is a system that rewards those with great credit, and really punishes those with OK or poor credit. 

Lenders look at many factors in pricing a loan, but the two factors that most affect rates are credit scores and Loan to Value ratio.  Here's an example:

Borrower A and B both want to buy a house for $250,000.  Both borrowers have $50,000 for a down payment.

Borrower A has a credit mid score of 774, Borrower B has a credit mid score of 685.

Borrower A will be rewarded for the credit score, and as of today's rates will be looking at a rate of 5.75%

Borrower B will be penalized for the credit score and will be looking at a rate of 6%! 

If the Loan to Value were increased to 90% (borrowers each have only 10% down payment), the rates for both borrowers would increase .125% (1/8%).  In addition, both borrowers would have to add PMI to their monthly payments to protect the lenders against borrower default in payments.

This risk based pricing goes even further than just scores and LTV though.  It also looks at whether this is a purchase or a refinance, and whether or not this property is owner occupied, a 2nd home, or an investment. 

>If the refinance is for rate and term only, there are no rate adjustments. 

>If the refinance is to pull cash out, there is a rate adjustment if the LTV goes above 60%. 

>If this is also an investment property, there is yet another adjustment UP to the rate. 

So, when I quote BEST RATES, I am looking at a borrower with great credit, low LTV and owner occupied purchase or rate and term refinance. 

There are even more factors that affect the rate you will pay, believe it or not.  This is becoming an increasingly complicated business. 

Not all lenders have the same pricing adjustments for all the same factors.  So, shopping a loan for you takes time, but it is something that I enjoy doing in my effort to find the best loan for your unique needs.

Please call at any time if you have questions, or if I can help in any way.

Warm regards,

Shelby

According to a very recent article in the Wall Street Journal, "it is very likely that April 2008 will mark the bottom of the US Housing Market.  Yes, the market is bottoming now."

How can this be?  Read on

"Most people forget that the current housing bust is nearly 3 years old.  Home sales peaked in July 2005.  Housing starts have fallen more than 50% and, adjusted for population growth, are back to the trough levels of 1982."

So, what's going to stop the housing decline?  According to this article - and it makes sense...

"Very simply, the same thing that caused the bust, affordability!  The boom made housing unaffordable for many American families ... especially first time homeowners who were paying up to 37% of their gross income for house payments."  That was just too much.  Prices got so high that people couldn't afford to live in the houses, so the bubble burst.

As a result of declining house values, slightly increased incomes, and lower interest rates, housing is again becoming affordable.  As soon as the public becomes more aware of this, people will start buying again, inventories will decrease, and this housing crisis wil officially be declared OVER!

So, the next question is, How can house prices stop declining?  The very simplistic answer is that "they always do."  Property has proved to be the best investment, over time, that anyone can make.  Most of the very wealthy have become wealthy through investing in real estate.  So, prices will rise again, much more slowly that during the boom, but they will rise. 

Sounds good to me. 

Enjoy your day/