Mortgage Blog James Wirth Bellevue Seattle Mill Creek

Tax Credit EXTENDED!

James Wirth (Bank of America Home Loans) — Fri, 06 Nov 2009 16:59:14 -0600

Good news! The home buyer tax credit has been extended! The new expiration date is June 30th, 2010.

Notice anything missing from that opening line? I have omitted the words "first" and "time" because 'move-up' buyers are now potentially eligible as well (conditions apply see IRS for details etc. etc. etc.). I suppose you could be a move-down buyer as well though... AND it's not well-publicized but almost any home that is your primary residence qualifies. Always wanted to live in a house-boat? Here's your credit. Thought about touring the country in an RV? Yep! You could qualify.

Just remember -- if you don't want to have to pay the credit back, you must live in the home as your primary residence for 3 years. That might be pushing it for the RV trip... Here's a run-down on important considerations;

The new guidelines are effective for transactions that close after today. If your home is closing on November 7th or after (up to June 30th of next year), these new guidelines apply to you.

New Guidelines

Income caps have been increased substantially. The new cap to receive the full credit is now $125K for a single filer or $225K for a joint filer. There is a $20K 'phase-out' on the income, if you make more than the $125K/$225k you would be eligible for a partial credit until your income is over $145K/$245K.

If you're a "long-time homeowner" who has lived in your home for at least 5 out of the last 8 years, you may also qualify for a tax credit if you buy a replacement primary residence before the June 30th, 2010 deadline. The amount is slightly different: $6,500 if you're single or you are filing jointly. If you're married but are filing separately, the amount is cut in half to $3,250.

No more last-minute rush! The new guidelines require home buyers to be under contract on or before April 30th, 2010 to qualify for the credit. But then you have 60 days to close.

If you'd like to read the news release from the IRS's Web site, here it is.

FHA to DELAY restrictive changes to condo financing

James Wirth (Bank of America Home Loans) — Thu, 22 Oct 2009 00:55:24 -0500

NEWS FLASH: the Department of Housing and Urban Developed announced today that they will delay changes to the FHA Condo policy. This is good news to anyone involved in the low to mid range condo market. The changes have been delayed until December 7th (after initially being delayed from last year until this month, and then were pushed back again until November).

They have also announced additional leniencies to address the difficult market conditions and augment some portions of the Mortgagee Letter 2009-19, providing additional information.

So "Spot Loan Approvals" are still on for another month!

Here's where you can find the FHA Mortgagee Letters 1996-41 and 2009-19: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/

There are also new Mortgagee Letters I haven't gone through yet, but they can be found at the same site.

Enjoy!

-James Wirth

How long -- REALLY -- will interest rates stay low?!?!?

James Wirth (Bank of America Home Loans) — Fri, 18 Sep 2009 16:18:01 -0500

How long -- REALLY -- will interest rates stay low?!?!? This is a question I'm asked almost daily.

It's probably safe to say everyone agrees one of the primary reasons why mortgage rates have stayed so low for so long is the commitment the Fed has to buying Mortgage Backed Securities from Fannie Mae and Freddie Mac. This artificial, temporary demand has kept prices for MBS higher (which means rates are lower) than if we hadn't had the MBS purchase volume coming from the Fed.

By the by -- "the Fed" in this instance refers to the Federal Reserve Bank of New York, which is carrying out the MBS purchases. You can view their Web site here.

By the by the by -- "MBS" refers to Mortgage Backed Securities.

The total amount the Fed is committed to spending by the end of 2009 is $1.25 trillion; to date they have purchased $849 billion, leaving roughly $400 billion to purchase by year-end.

With 15 weeks left it puts the Fed purchasing schedule at approximately $26 billion per week, which they are on-track to accomplish based on their weekly purchasing history.

Here's the kicker: as we get closer to the end of the Fed MBS purchasing, mortgage rates will rise. Let that sink in because we are already 2/3 of the way through the Fed purchasing MBS and we only have 3 1/2 months left in 2009!

There are two reasons why rates will climb:

A) MBS Investors (other than the Fed) know that current high-demand is very temporary and if they wait until after the Fed stops purchasing, they will get a higher return on their investment (often referred to as the 'yield'); and

B) Mortgage lenders know if they commit to a rate of 5% on a $200,000 loan for Bob and Betty Buyer or Russ and Rachel Refinacer but don't sell that loan (called the NOTE) to Fannie Mae or Freddie Mac before the market rate goes up to 6% (the timing of this is often referred to as market risk), they lose money on that loan -- $2K for the first year to be specific.

A loss of $2K may not seems like much, but imagine a lender losing 1% on $100 million dollars' worth of loans (a 1% rate increase could easily happen if demand drops off quickly), then they just lost a million dollars in the first year alone. That's a lot of 'market risk' and lenders will start 'padding' their rates to try to mitigate potential losses as much as possible.

I am asked the following daily:

Q: James, what do you think is going to happen with interest rates?

A: My guess is they'll start rising in the next 30-45 days and be above 6% by the end of the year, based on my above assessment. And if they don't hit that mark then I owe fellow ActiveRainer Paul McFadden a cup of coffee.

Don't get me wrong -- low rates is good for business. I would very happily be wrong about this (and Paul, I won't even wimper if I end up shelling out for coffee. But when I ask my Magic 8-ball the question: Will interest rates stay low? It gives me the same answer, nearly every time:

James, don't hold your breath.

And by the way -- because rates will be going up very shortly in my honest opinion, if you've been waiting to refinance then it's time to put the pedal to the metal; due to great values and the first-time home buyer tax credit that expires after November 30th, if you're waiting to buy then let's kick it into high-gear.

And Paul, I'll take a double-tall vanilla latte, no whip.

Thanks for reading! --James Wirth

Marketing Tip/Idea: Coffee on you! (MTOTD)

James Wirth (Bank of America Home Loans) — Mon, 24 Aug 2009 17:02:13 -0500

For those who are acronym-challenged, MTOTD stands for "Marketing Tip of the Day." Yes I made the acronym up and really didn't expect anyone to get it, but thought it might at least get someone's attention...

Marketing Tip of the Day: Coffee on you!

Pair-up with a business partner (Title Rep, Escrow Rep, your favorite Mortgage Loan Originator hint hint, nudge nudge), meet at your preferred walk-in coffee spot and each of you put $20 onto a gift card from that location. Then hand the gift card to the cashier and ask them to pass the word -- that you would like to pay for each single order of coffee until the gift card runs out. Let them know where you will be sitting and that you'll be talking about home buying and selling if anyone asks who paid for your coffee. Then grab a drink of choice for the two of you and strike up a conversation about -- you guessed it - home buying and selling!

I've done this 3 times. We chose off-peak hours because a) we didn't want the money to be gone in 10 minutes and b) we didn't want to hassle the cashiers (who are often also the baristas) during their rush times. Plus we were there to catch up and talk about -- once again -- home buying and selling.

The $40 ($20 from each of you) should buy around 10 coffee orders. Each time I've done this, I or my Real Estate Agent partner (or both of us) received at least one real lead or referral. Nothing like saving someone $4 to get the conversation started! Every time someone's drink was paid for they came over and at least said thank you and nearly every time had a question or two and took our business cards.

The first time I did this, one of the contacts came from a barista who came over to thank us for the extra tips (people were putting half or more of what their coffee would have cost into the tip jar), and turned out that she and her husband were looking for an equestrian property in rural Snohomish county and the Agent happened to know of one.

Not bad for spending $20, wouldn't you agree? If you're anxious at all about approaching strangers or are just looking for a fresh way to do it -- I highly recommend this. It's about the best $20 in marketing I can think of. Definitely worth passing on.

For the life of me I cannot remember who originally suggested this, I'd love for someone to comment on the source of the idea if you've heard of it before.

And in the meantime...

Coffee anyone?

Thanks! -- James Wirth

My new home: Bank of America Home Loans!

James Wirth (Bank of America Home Loans) — Mon, 10 Aug 2009 14:39:40 -0500

greetings all! Today marks my first day at Bank of America Home Loans. With this change comes additional responsibilities a shorter commute (a.k.a. a happier wife) and a new home city: Mill Creek! I'm very excited about this new chapter of my career and I am re-affirming my commitment to blogging and providing useful information to Real Estate Agents and home buyers/owners alike.

My contact information has been updated and I will be providing additional finormation as I become settled in my new office inside the Mill Creek Town Center! South Snohomish/North King County folks, please come by and say hi (I'll be in the office as of Thursday).

And I'll write more soon! --James Wirth

Making Home Affordable -- Please sign this petition!

James Wirth (Bank of America Home Loans) — Tue, 28 Jul 2009 20:20:05 -0500

Making Home Affordable, announced in February 2009 to much fanfare, promised to be the solution for 9 million homeowners.

The two programs, Home Affordable Modification Program targeting homeonwers unable to make their payments because of financial hardship; and Home Affordable Refinance Program targeting homeowners who were able to make their payments but unable to refinance into a lower rate because their equity had fallen, seemed to be the answer.

30 days later, Making Home Afordable struggled to launch but gained momentum as lenders began making announcements that they were adopting the standards and 'participating' in the programs.

Five months later, if you google "Home Affordable Modification" -- and then click through the first several pages of the government listings (how the heck do they get such good placement) and beyond the solicitations of countless mortgage companies and modification companies promising to deliver on the, well, promises, of the program -- you will begin to see blogs and message boards overwhelmed with stories of homeowners either unable to get an answer from their lender on whether they qualify or worese, their lender says they don't. And this despite the "makinghomeaffordable.gov" Web site indicating that they 'may qualify.'

It is becoming increasingly apparent that the programs are struggling to reach critical mass.

I have posted a number of blogs on this subject in an effort to act as a resource for homeowners struggling to understand these programs here, here, here, and here, and I've received countless private ActiveRain messages from homeowners nationwide turning over every rock they can find in search for answers. What have I told them?

Make your voices heard.

I've suggested contacting their lenders repeatedly (squeaky wheel gets the grease), contact their State Representaves (which you can do here), and I'm writing today to offer another solution:

I've created an online petition, designed to unite the voices of the many who are for numerous reason either not getting an answer on whether they qualify, or just flat out are being told they don't.

http://www.petitiononline.com/afford/.

The petition calls for transparency and accountability in the face of so much uncertainty. After all, it's already tough enough to be faced with losing a home...

Please take a moment, if you are so inclined, to add your voice.

United we stand!

Thanks for reading -- James Wirth

Where the heck have I been lately?!?

James Wirth (Bank of America Home Loans) — Tue, 07 Jul 2009 17:59:43 -0500

If I'm the only one in this boat, I'd be very surprised.

Things have been, let's say, interesting lately. Actually, "challenging" would be putting it mildly. Many changes in the mortgage business and I've found myself scrambling a bit to keep up with everything. Unfortunately, my blog posting frequency has paid the price although I have done my best to return private messages received.

So, where is the mortgage market?!? Hovering above 5% based on the standard information I post regarding rates. I'll try to get back in here again very soon and give a more formal update. But in this post I want to pass along a nice tool I've often referred to when working with potential clients currently renting. It makes a very good attempt at cracking the age-old question of:

Should I buy or should I rent?

It's from our good friends at the New York Times Web site, is quite interactive and does a very fair job at addressing the pros and cons.

It can be found here.

Happy financing everyone! -- James Wirth

Tax Credit as down payment -- UPDATE!

James Wirth (Bank of America Home Loans) — Fri, 29 May 2009 15:28:45 -0500

The US Department of Housing and Urban Development announced today that the $8,000 tax credit is officially approved for use as down payment provided at closing!

Woah, pump the brakes dude.

Before you leave work early to write an offer, we're still one step away -- getting the lenders ready to implement this. BUT, today was a HUGE leap forward and many of the logistical details are now know. I would caution everyone to be patient, however, and if you're writing an offer and relying on this, a contingency for this being available may be a prudent step.

So far this is specifically for FHA loans. It remains to be seen whether it makes sense on a conventional loan or whether they will allow this, but the majority of my buyers waiting for this are looking at FHA anyway.

Here's the IRS site on the tax credit (waiting for it to be updated with this info);

FHA's Web site with the announcement

Using First-Time Homebuyer Tax Credits for the Downpayment (this one has a lot of the details on how it works)

Definitely great news and I will keep you posted! --James Wirth

Mortgage Rate Update -- THE FLOOR IS CLIMBING! THE FLOOR IS CLIMBING!

James Wirth (Bank of America Home Loans) — Thu, 21 May 2009 17:41:42 -0500

Mortgage Rates have gotten a little squirrelly of late, and are up about .25% from my last posting, here (yes, you must read my previous post -- it's the ol' bait-and-switch).

Many Economists (whoever that guy is, he sure is mysterious) say that rates are likely going to climb to 6% by the end of the year.

THIS COULD BE IT PEOPLE!

Ok, that may be slightly dramatic, but rates always go up faster than they go down, so if you're getting close to buying or refinancing...

"Hello, this is James Wirth with your red carpet room service. It's now time to WAKE UP... or I mean... LOCK YOUR RATE!

As always, thanks for reading! --James Wirth

First-Time Home Buyer tax credit allowed as DOWN PAYMENT ASASISTANCE?!?

James Wirth (Bank of America Home Loans) — Wed, 13 May 2009 19:53:22 -0500

How's everybody doing? Everyone keeping up?!?

Washington State legislature passed a law recently that allocated funds to be used as short-term loans that would provide the $8K tax credit up-front, at closing to be used as down payment or for closing costs! You can read a recent article on the subject here. We've bumped into a bit of an accidental IRS road block, that they are currently working through.

And now, FHA SEcretary Shaun Donovan indicated to a NAR conference in Washington that 'that important changes, which the National Association of Realtors^® has been calling for, will help consumers purchase a home. "We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a downpayment," Donovan said. According to Donovan, the FHA's approved lenders will be permitted to "monetize" the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.'

Much of the details have not been announced, but thi sis very exciting stuff! You can read more here

Read more information on the Realtor.org site here.

Thanks for reading! -- James Wirth

Mortgage Rate Update -- Let's give 'em somethin' to talk about!

James Wirth (Bank of America Home Loans) — Wed, 13 May 2009 19:11:26 -0500

Interest rates today remind me of my 1 1/2 year-old... I turn my back for ONE SECOND and he falls down! Based on a number of factors including unemployment numbers coming in worse than expected, mortgage rates went down today, closing at the recent low:

4.5% Rate / 4.673% APR
P & I payment: $2,112.88
Loan amount: $417,000
Down payment/equity: 20%
Loan Program: 30 Year Fixed

Rates are as of 5/13/09. Subject to change without notice and most likely they will, but I will be ready in the morning in case they open where they closed! Anyone care to lock a rate? Anyone? Bueller? Bueller?

--James Wirth

Making Home Affordable Update -- FAQs

James Wirth (Bank of America Home Loans) — Tue, 12 May 2009 19:42:04 -0500

I have received a lot of feedback on my original posting entitled "The Home Affordability Refinance Program." You can read the original post and comments here. The goal of my original posting was to provide information regarding the newly announced "Making Home Affordable Program." Here' s a quick review:

The program has two components: the modification program -- designed to reduce the monthly payment of struggling homeowners to a more affordable level to keep them in their homes; and The refinance program -- designed to allow homeowners to refinance into a lower rate who are not able to qualify otherwise because of a loss of equity due to lower values.

There is still a lot of confusion about the details of the programs, so I've compiled a list of Frequently Asked Questions based on comments and feedback I've received since my original post. I hope this will offer some clarity and ease the pain of trying to sift through the details.

Q: The makinghomeaffordable.gov Web site says I may be eligible, but my lender says I am not. Who is right and how do I fight this?

A: A caveat to the results of the 'quiz' on the makinghomeaffordable.gov Web site is that you must check with your loan servicer (the company you make your house payments to) to find out if you are eligible. This is a crucial point because of two issues: 1) There are a number of clarification points the short quiz doesn't take into consideration; and 2) The loan servicer may be applying a second set of internal qualifying requirements on top of what the government guidelines require. We are definitely seeing this on the refinance program, and I believe it's happening on the modification program as well.

Q: It seems that I qualify for everything on the programs except for the way I qualified when I bought my home: on a stated income program. Why would this disqualify me?

A: Unfortunately the program limits participation by those who used a "Stated Income" loan to qualify for their existing home loan. I went a bit overboard on a rant about this in a separate posting, which you can read here. Suffice it to say that I see this as one of the biggest issues with this program and hope they address this. But for now this is an issue.

Q: I contacted my lender about a loan modification because my income has been reduced substantially but they told me I did not qualify because I am current on my payment. Why am I being punished for being responsible?

A: The way I read the modification program, being delinquent on your house payment is not a prerequisite for qualifying; however, I have heard from many people that their lender will not consider a modification for them, that their only option is a refinance and that has typical income qualifying guidelines. So the person hoping to qualify for the modification is typically not the same person hoping to qualify for the refinance, which is limited to reducing the interest rate -- more or less.

Recommendation: Stay with it. If you are in danger of becoming late or are already late on your monthly payments, contact a HUD counselor immediately by calling 1-888-995-HOPE. Stay in communication with your loan servicer. Even considering talking to your State Attorney General and talking to your state's congressional representatives. There is clearly a high level of resistance to implementing these programs. Making your voice heard!

Other entries on this subject:
Original: The Home Affordability Refinance Program posted 3/04/09
Update: Making Home Affordable Part II posted 3/30/09
Rant: Don't disqualify someone because they had a stated income loan! posted 4/16/09

I will continue to add FAQs to this post. Comments are welcome! --James Wirth

Mortgage Rate Update -- "He didn't fall?!? Inconceivable!'

James Wirth (Bank of America Home Loans) — Wed, 29 Apr 2009 18:43:55 -0500

For any fellow Princess Bride fans, that classic line can be used in myriad ways. In this case, I'm absolutely flabbergasted that we haven't seen an increase in mortgage rates. In fact, they might have smidged down. This is to me absolutely, positively, and unequivocally, inconceivable.

Oh no wait, now they're up again.

Oops -- they've inched down. Now back up.

And so it has gone for the past couple of weeks -- down a smidge, up two smidges, down half of a smidge, and so on. Rates are basically unchanged and vary by down payment, loan program, discount points etc. anywhere from 4.5% rate/4.75% APR to 5% rate/5.25% APR for a 30-year Fixed, .25% more for cash-out, etc. etc.

I will say this -- loans are taking longer. It's better to get all of your paperwork in, submit for approval, and then wait for a while if necessary -- all too often it's the other way around, buyers will wait to submit their paperwork and then it's a mad scramble to get everything done on-time.

Don't get me wrong, I like a scramble just as much as the next guy or gal. Throw some green peppers, onions and mushroom in there and now we're really talkin'!

Not so much on my loan scenarios though. Not so much there.

Thanks for reading! --James Wirth

P.S. I apologize if I made you hungry and you still have a few hours before your next meal.

Little Jimmy and the Tenor Saxophone

James Wirth (Bank of America Home Loans) — Tue, 21 Apr 2009 16:13:36 -0500

I could hardly contain myself.

FINALLY, after all the discussions on proper etiquette and respect and etc. etc., the days of torture were over. There they were, lined up along the wall in all their glory.

It was like I was at opening day at Kentucky Derby - anxious energy, nipping at the other horses, chomping at the bit ...

The gates flung open and I dashed across the room. I had spent literally minutes mapping out my strategy to get to the right section. Past the flutes, dodge the baritones beyond the trumpets and just before the clarinets.

First to reach the line-up I went straight for the coolest instrument I had ever seen - the saxophone. With several to choose from and the rest of the pack closing in - I grabbed the biggest one I could find: A TENOR!

That was 7^th grade. I actively participated in marching, pep and concert bands throughout middle and high school. I was the proverbial band geek. Ahhh, those were the days.

Nevermind the 2,700 bus rides I would carry that tenor saxophone back and forth to school and besides, I became stronger because of it - literally, that thing was heavy. And besides... it always impressed the girls more. Yeah, I was cool.

In fact, I must give credit to that fateful tenor sax and the path it put me on for attracting my future wife, who by the way, happened to be an ex-cheer leader. Who would've thunk - a cheerleader! I kept my secret identity carefully hidden of course, until she had fallen madly in love with me. It's band ‘geek' after all, not band ‘jock.' I kid, I kid! Please don't stuff me in the locker again... it broke my reed last time...

The only reason she eventually found out I was a closet band geek was by accident and actually involved a real closet - we were cleaning out a closet at my father's and she uncovered my old letterman's jacket. Before I had a chance to protest she pushed back my toga (don't even ask) to reveal the jacket front proudly displaying the two events I lettered in... the first one was Golf (thank you Tiger Woods for making one of my events ‘cool') and yes, my band letter and its' two bars. The only reason why I didn't letter 3 years was because as a senior I branched out. You guessed it -- Choir.

As "After School Special" as all of that sounds, music truly has had a profound impact on my life. I am a better person because of my musical pursuits, and I would like to take a moment to pay tribute to the tireless band teachers in our education system. Though it may seem like a thankless job, this tenor saxophone player owes you his gratitude. Mr. Demau, my first band teacher (I hope I'm not butchering your name but hey it was 7^th grade); Mr. Acox, long-time Garfield High School band director and local jazz legend, thank you for letting me hide in your band room, Mr. Mao, you gave me the courage to branch out and even attempt to learn the bass clef, which I failed at miserably but that was my fault, not yours. Gentlemen, I'm still making notes... now they happen to be mortgage notes, but notes nonetheless. Thank you for your contributions to my life.

In our current economic climate where schools are slashing costs everywhere they can to make cuts to their budgets and keep their doors open, refreshing the school-owned musical instrument supply certainly can't rank very high on the priorities. Music budgets have been retracting over the past several years, even when the economy was doing well! Contributions of musical instruments to school programs is more important now than ever.

Donating instruments your family may no longer be using can really make a difference to a young person who may not have an opportunity to gain access to an instrument otherwise.

Another person who had a significant on my life both musically and otherwise, is my Mom. As a single mother supporting the two of us, she scraped together enough to rent a saxophone for two years. The rest of the time we were lucky enough to have instruments available from the school.

If you are in the Puget Sound area, there is a new program called Instruments for Kids. It's currently focused on the Edmonds School District and will branch out to other districts as early as next year (the more successful the program the sooner other schools will join). Please consider donating unused instruments to this needed and worthwhile program. We can make a difference in the lives of our youth, one instrument at a time. It certainly made a difference in mine.

If you are in or close to South Snohomish County, donations can be made to the Edmonds or Lynnwood Coldwell Banker Bain Real Estate offices:

Edmonds
108 5th Ave S
Edmonds, WA 98020

Lynnwood
4100 194th Street SE, #135
Lynnwood, WA 98036

For additional drop-off locations or for more information, please Instruments for Kids by phone at 425.890.2002 or by email at instruments4kids@cbbain.com

As always, thanks for reading. And thanks for supporting Instruments for Kids!

Instruments for Kids: What's in YOUR closet?!?

-- James Wirth

Mortgage Rate Update -- 'she canno' hold on much longah' cap'n!

James Wirth (Bank of America Home Loans) — Fri, 17 Apr 2009 18:32:57 -0500

Yes yes, another trek reference. Not that anyone's counting *sigh*

The week started lower, held at the hump and lost momentum in the last couple of days. Here's where we wound up:

4.875% Rate / 5.026% APR
Loan amount: $417,000
Down payment/equity: 20%
Loan program: 30 Year Fixed
Minimum credit score: 720

Everything points to this being the bottom for rates -- well, except that ONE Bank of America announcement that said they expected 4.125% rates. Hey BofA, here's an idea -- take that TARP money and MAKE NEW LOANS!

Ok, I apologize. My usual diplomacy is nowhere to be found.

Thanks for reading!

Should "Stated" loans be disqualified from the Making Home Affordable Program?

James Wirth (Bank of America Home Loans) — Thu, 16 Apr 2009 22:05:48 -0500

In a blog on the subject of the Making Home Affordable program, I have received a number of questions from ActiveRain'ers looking for clarification, expressing their frustration or generally commenting on the program. I have also received a number of private messages from individuals who had specific questions they wanted to be kept out of the blog.

You can view and comment on the blog post here.

In both of these scenarios I have done my best to provide clarification as I understand it. Unfortunately the program is still very new and I don't believe it's really up and running yet; I'm not sure how helpful I've really been but I hope people continue to comment, and I'll continue to respond.

One recurring question/frustration -- especially in the private messages, has been this: 'I bought my home using a stated income loan and now they're saying that disqualifies me from the program.'

The requirement of the Making Home Affordable program that borrowers were 'honest' when they applied for a stated income loan has been debated heavily, and we've just begun.

As an industry professional I have heard many accounts of a borrower, after providing income documentation as requested, who was told by a Loan Officer that they were just going to do a 'stated' loan and when the borrower received the completed loan application back from the Loan Officer to sign, the income had been changed and they were told 'oh don't worry about it, it doesn't matter anyway -- it's a stated loan. Just go ahead and sign.'

This continues to be an issue even today! Case-in-point: I recently discussed a Home Equity Line of Credit with a bank representative on behalf of a client of mine. Ater they verified that my client's credit score was high enough they suggested their stated income program, and I inquired about the maximum debt-to-income ratio for that program to make sure they were within the qualifying range. Her response was, "why does it matter? It's STATED," and only after pressing the issue was I told what the maximum percentage was. The implication was that we could just adjust the income upward to bring it into the qualifying range if it were too low.

This wasn't two years ago, this happened very recently!

One camp argues that a borrower should have protested and refused to sign if the income they reported wasn't what they saw on the documents when they were presented for the borrower's signature. But where is the accountability of the Loan Officer who altered the application in the first place?

To complicate things further, that's assuming they even realized the income was different!

Most of us think of our income in two separate categories: gross income (the big number, before Uncle Sam takes his share), and take-home income.

Enter human nature: In discussing income, most of us think of gross income in terms of an annual amount and our take-home income in terms of a monthly amount. When a borrower is asked for gross income they often respond with their annual salary, which is then converted to a monthly amount for the loan application. It's therefore reasonable that the borrower, when signing the application, may not immediately realize it if the Loan Officer had changed the income in order to qualify.

POP QUIZ
Answer the following question. Don't work out the math, just pick the one that jumps out

An annual salary of $65,000 is equal to how much monthly:

A)     $5,225
B)     $5,417
C)     $5,872
D)     $6,017

The answer is B. Please comment with which one you would have picked.

Let's look at this in a real-life scenario -- you're the Loan Officer and I'm the borrower -- a little role-reversal here, walk a mile in my moccasins, will you?

THE APP (short for application)

We complete the loan app over the phone, it takes about 35 minutes. On the subject of income, you ask me what my gross is.

YOU: So, what's your gross income?
ME: Well, my salary is $72K/year.
YOU: NICE!
ME: Yeah, it's a living.

I answer the rest of your questions, you indicate that based on my credit score I qualify for a stated income loan, meaning that I don't need any income documentation like paystubs or W2s, that would normally be required. We set an appointment for me to come in and sign the initial disclosures required to process my application.

THE APPT (short for appointment)

Fast-forward 2 days later, I'm in your office to sign some initial paperwork. We sit down and begin going through the 40 pages of documents. About 1/2 way through on one of of the pages, page 2 of the loan application, it shows at the top my monthly gross income of $6,480, my various bank accounts and their balances, and the balance and payment etc. of my liabilities. I object at the balance on my credit card and you explain that it's only a snap-shot in time and there's generally a lag between making the payment and the payment reflecting on my credit report. I nod in understanding and we turn the page.

What's the likelihood I will realize that the monthly income amount was $480/month too high? Remember, we have been talking for 20 minutes and I've had to go to the bathroom for 10, we are half-way through a stack of 40 pages, and THERE'S NOT EVEN A SIGNATURE LINE ON THAT PAGE.

Things that make you go, "Hmmmmm...."

Oh -- rest assured though, the borrower will be required to sign a 'final' loan application, 52 days from now, after they'e found and successfully negotiated a price on a home, when they are signing the actual loan docs and are closing on the house in two days on a day where they had to take their lunch hour, at the end of the month, and they know they're going to run over on time. Nothing on their mind I'm sure...

My goal here was to make the point that it's not black and white. Borrowers that took advantage of "Stated Income" loans may not have realized their income had been inflated or they may have been coached as far as what amount they needed to put in order to qualify.

Regardless, the point still remains: lowering their monthly payment is going to increase the chance of them being able to stay in their home.

And isn't that the purpose of the program? To make their home more affordable?

Other entries on this subject:
Original: The Home Affordability Refinance Program posted 3/04/09
Update: Making Home Affordable Part II posted 3/30/09
Update: Making Home Affordable FREQUENTLY ASKED QUESTIONS posted 5/12/09

Thanks for reading! --James Wirth

Donald Trump, YOU'RE FIRED!

James Wirth (Bank of America Home Loans) — Wed, 15 Apr 2009 15:15:33 -0500

An article was released today quoting The Donald in a phone interview on CNBC's "Squawk Box."

The article quotes Mr. Trump as saying:

"The banks are not lending money, there's no money out there, no matter how strong you are, no matter how good your deal is, if you go to a bank today they virtually laugh at you if you're asking for money. They don't have money or they're hoarding money,"

OUCH.

Here's the full article, and it had a pretty catchy title: Banks 'Virtually Laughing' at Loan Seekers: Trump

But if you take the time to watch/listen to the interview -- which most of us don't have time to do -- he was very clearly talking about commercial loans, NOT residential financing. When you're in the market for a FIVE HUNDRED MILLION DOLLAR loan, I imagine it's a lot different than the five hundred thousand dollar loan most of us are concerned with.

Well gee, that makes a difference!

This sort of -- dare I say -- irresponsible reporting is hurting our economy's recovery. Imagine how many people might have glanced at this article and scanned the quote from Mr. Trump and thought, "Wow. If Donald Trump thinks it's hard to get a loan, what chance do I have?!? Well forget trying to buy a house then!"

So to re-direct my subject line more appropriately: Unnamed CNBC reporter: YOU are fired!

To everyone reading this: home loans are alive and well. Thriving, if I may be so bold. No one gets a home loan from a reporter, so I'm not sure why there are posing as the authority. Oh right... they're quoting The Donald...

While this post may be a little more on the satirical side than most of my comments, there's only so much a guy can take as far as mis-information, innacurate reporting that serves no good purpose!

Ok -- off my soapbox now. And it's available to anyone who'd like to comment. STEP RIGHT UP!

Thanks for reading! --James Wirth

Mortgage Rate Update -- Holding Steady

James Wirth (Bank of America Home Loans) — Tue, 31 Mar 2009 21:26:08 -0500

Mortgage rates held on to improvements made over the previous sessions today. Little Mr. Doubting Thomas here was sure they were going to climb back up.

DARN YOU MAGIC 8-BALL!!!!!!

Lucky for you fence-sitters out there, you got to weigh the pros and... well, they're really all pros... for another day.

I leave you with one of my favorite quotes:

"Good things may come to those who wait, but only the things left behind by those who hustle." Abraham Lincoln.

Let's show some hustle people! Pick up those knees! MOVE! MOVE! MOVE!

Thanks for reading! --James Wirth

Mortgage Rate Update -- 'little less conversation, 'little more action!

James Wirth (Bank of America Home Loans) — Mon, 30 Mar 2009 21:20:51 -0500

The last couple of bond market cycles have produced a nice little drop in rates. Although it's impossible to predict any bottom (stock market, gold market, real estate market, rates), all factors point to rates being as near to the bottom as we can really hope to guess:

4.625% Rate / 4.773% APR
P&I payment: $2,143.96
Loan amount: $417,000
Down payment/equity: 20%
Loan Program: 30 Year Fixed
Minimum Credit Score: 720

The only sure way to see the bottom? In the rear-view mirror.

For every 1 person who times the bottom just perfectly, there are 100 who missed it; maybe even more than that.

Call or email me today. Let's talk about why right now really is the time to buy.

Thanks for reading! --James Wirth

Making Home Affordable -- Part II

James Wirth (Bank of America Home Loans) — Mon, 30 Mar 2009 20:44:15 -0500

In my blog at the beginning of March I outlined my understanding of that portion of ARRA (the American Recovery and Reinvestment Act of 2009), designed to curtail foreclosures and assist homeowners in taking advantage of the historically low mortgage rates currently available. My original blog entry can be found here.

A couple of asides:

There's a site that has been published containing interactives, information releases et al regarding ARRA, which can be found at www.recovery.gov.

The foreclosure mitigation plan, now somewhat officially coined the "Making Home Affordable" program, can be found at www.makinghomeaffordable.gov.

Ok: Here's an UPDATE on the loan modification and refinance plans:

We're still waiting..........

While more details have been released since my original posting (once again, found here), many of you have expressed a great deal of frustration from your efforts to receive answers in the channels that have been outlined. Loan servicers (the company that receives the monthly payment) understands the program one way, the official web site (www.makinghomeaffordable.gov) understands it another way, and the HUD Counselor Hotline that has been established (1-888-995-HOPE) seems to understand it yet another way.

From what I understand, it feels not unlike the Abbott and Costello routine, 'Who's on First.'

I don't mean to make light of the frustrations of many. I sympathize with you and hope that things will resolve quickly.

My advice: hang in there. Keep calling the loan servicer, the HOPE hotline, your government representatives, keep rocking the boat, keep those wheels squeaking. The industry was not set up to make sweeping changes this quickly and we can have an impact on how quickly they move by continuing to make our voices heard... even if it seems it is falling on deaf ears.

As always thanks for reading! --James Wirth

The Home Affordable Refinance Program

James Wirth (Bank of America Home Loans) — Wed, 04 Mar 2009 14:16:17 -0600

Please see the bottom of this post for updates and lots of great comments below that!

Original title of this blog was "The Home Affordability Refinance Program" (corrected from 'affordability' to 'affordable') once the program title had been verified.

As announced in February, the terms of the $75 billion foreclosure mitigation plan were released today. You can read the CNBC article here.

Here are my Cliff Notes:

The Home Affordable Refinance Program will be available to 4 to 5 million homeowners whos mortgage is currently owned by Fannie Mae or Freddie Mac and aimed primarily at people facing 'imminent hardship.' Borrowers would be required to demonstrate the hardship to their servicers, such as job loss, reduction in income or a looming payment increase that cannot be met. Cash incentives are offered to loan servicers for their participation.

Eligibility, etc.

~ Specifically for owner-occupied, first-lien loans currently owned by Fannie Mae or Freddie Mac.

~ Loan must have been originated on or before January 1, 2009. Modifications can be made between now and Dec. 31st, 2012. Only one modification per customer.

~ Full income documentation must be provided, including an affidavit of financial hardship.

~ Incentives will be offered to servicers to modify at-risk borrowers who have not yet missed payments.

~ Participating servicers (not sure who is and who isn't participating yet) will be required to service all eligible loans whenever premitted by contract and will use a "net present value" test to determine the benefit. If the test shows a modified scenario would be beneficial to the borrower they will be required to modify the loan accordingly.

Servicers will follow a specified order sequence to reduce the montly payment to no more than 31% of gross monthly income (DTI):

Rate reduction;
Extending the term to up to 40 years;
Forbearing principal (adding part of the re-payment to the end of the loan term);
Principal forgiveness or Hope for Homeowners refinance are also acceptable.

The incentives include:

-- $1,000 up-front fee for each modification plus "pay for success" fees on still-performing loans of $1,000/year;

-- $1,000 principal reduction per year for up to five years to homeowners who make their payments on time;

-- One-time bonus incentive payment of $1,500 to lenders/investors and $500 to servicers for modifications made while a borrower is still current on payments;

-- Additional incentives for extinguishing 2nd liens;

-- The "Hope for Homeowners" program that has yet to make any noticeable difference will also pay similar incentives.

Feel free to comment on your opinion about this plan. I think it's a good, needed step. It's only for Fannie Mae/Freddie Mac-owned mortgages but that is the bulk of them and lenders such as Countrywide who have large portfolios of loans that haven't been sold to Fannie/Freddie are showing signs of being willing to work with homeowners to modify loans as well.

The modifications themselves are handled directly through the loan servicer so whoever collects the monthly payment for the borrower is who they want to call. The program will be highly regulated (audited by Freddie Mac), so there doesn't seem to be any reason to hire a 'modification consultant' or pay a fee to anyone to participate in the program. Of course, I'm happy to review it with anyone who has questions.

Thanks for reading! --James Wirth

Here are follow-up posts I've written on this subject:

Update: Making Home Affordable Part II posted 3/30/09

Rant: Don't disqualify someone because they had a stated income loan! posted 4/16/09

Update: Making Home Affordable FREQUENTLY ASKED QUESTIONS posted 5/12/09

Captain's Log: Supplemental

James Wirth (Bank of America Home Loans) — Fri, 27 Feb 2009 20:12:24 -0600

YES: I realize this is not the first time I've referenced Star Trek in a blog entry;

NO: I've never been to a Star Trek Convention. Not that there's anything WRONG with that...

Sing with me now: 'Star-Trekkin' across the Universe...'

What a week this has been! Here are a few highlights:

Stocks up, rates worse, stocks down, rates worse...

Guideline changes-- mortgage insurance is getting tighter, good for FHA...

Tax credit -- can claim it on 2008 taxes???

Seattle rated #1 in how many different ways?

Through it all, I know this for certain: Now is a GREAT time to buy!

Buyers, remember: on the way down, you have the leverage; on the way back up, the seller has it. And the only way to see the bottom perfectly is through your rear-view mirror so stop reading this and get out there! GO GO GO!

Thanks for reading! :) --James Wirth

Mortgage Rate Update -- heading up and sideways

James Wirth (Bank of America Home Loans) — Thu, 26 Feb 2009 18:40:40 -0600

Rates have had a bad run over the last couple of days and we're back solidly into the fives. Well, 5 at least...

5% Rate / 5.152% APR
P&I payment: $2,238.55
Loan amount: $417,000
Equity: 20% / Credit Score: 740
Loan Program: 30 Year Fixed

Hey, looks like we are back to a maximum conforming jumbo loan amount of $567,500. 10% down for a conventional loan, 3.5% down for an FHA loan...

And for first time home buyers, the 2009 tax credit can be applied to 2008 taxes if you haven't already filed or you can file an amended return!

As always, thanks for reading --James Wirth

Home Sale -- Save up to 25% or more! While Supplies Last! Must act now!

James Wirth (Bank of America Home Loans) — Thu, 26 Feb 2009 18:14:04 -0600

Ok, if that's not enough to get the fence sitters off their duff and into their Realtor's car, also consider this:

There are currently 15 million students in colleges and they're not all going to move back home after graduating;

60% of current marriages will soon need two households due to divorce;

According to a Harvard study we need 2.7 million MORE homes than are currently in existence by 2011;

In order to get an interest rate comparable to today we'd have to go back to England 315 years ago. Talk about historic low;

The only way to see the bottom of the market is by looking in the rear-view mirror. The leverage for the buyer is on the way down; the seller has it on the way up. On which side will you make your offer?

Thanks for reading! --James Wirth

Mortgage Rate Update -- Friday Wrap-up

James Wirth (Bank of America Home Loans) — Fri, 20 Feb 2009 19:35:12 -0600

Foreclosures: bail out or fail out?

While many of the details have yet to be made clear regarding the foreclosure rescue plan, there is certainly no lack of media coverage. The article was written for the New York Times and carried by the Seattle PI (they are cutting back after all), calling the $75 Billion dollar plan 'more ambitious than expected.' So far so good... Read the article here.

Mortgage rates-- it's a photo finish!

Rates finished basically even on the week. Here's how we ended the day:

4.875% Rate / 5.026% APR
Loan amount: $417,000
Down payment/equity: 20%
Loan program: 30 Year Fixed
Minimum credit score: 720

Tax Credit! Tax Credit! Get your Tax Credit!

These details are more readily available than much of the rest of the stimulus law: First Time Home Buyers making $75K for a single person or $150K for a married couple get full benefit when they buy a primary home between January 1st and Dec. 1st, 2009. The credit is $8,000 and is applied on their 2009 federal income tax filing.

Cha-Ching!

Thanks for reading! --James Wirth