California Home Loans

Wachovia Wholesale Lending to Shut Down?

2008-07-21T14:19:49Z

We are hearing about the shutdown of wholesale mortgage operations at Wachovia, with a Press Release due out at 1:00pm EDT. This morning, we received the following:

"Wachovia wholesale is shutting down today. Press release at 1PM."

"All us reps were told this morning by top managment that wholesale will be completely shutdown by August 31st and a conference call will be this afternoon. All reps were called Sunday afternoon on the east coast...both Portfolio and marketable products."

The info is coming in from various sources including tipsters, forum members and outside sources - many of whom are (or were) Wachovia employees. We have no detailed information at this point on the number of people who will be affected.

An email sent to brokers by one AE says:

"Good Morning just wanted to let you know that we learned last night that today Wachovia will announce its closing its Wholesale division.

There will be a conference call at 1 pm and I will send out a follow up to that call."

From their web site: "Today's Wachovia was created when First Union Corporation acquired the former Wachovia Corporation and changed its name to Wachovia." That merger occurred in September of 2001; some may also recall First Union's acquisition (and subsequent shutdown) of then-subprime-giant "The Money Store" just a year prior. Many analysts and pundits have pointed to Wachovia's acquisition of Golden West Corporation, parent holding company of World Savings Bank in Oakland, CA in October of 2006 as a cause for recent woes over their $120 billion portfolio of Pay Option ARMs, referred to as "Pick-a-Pay" or "PAP" loans.

Wachovia Corporation will be announcing their second quarter earnings tomorrow, 2008-07-22

Should this happen, there are thousands of jobs across the United States that will be lost and will play its part in reshaping the Mortgage Broker industry as we know it today.

The Fannie Mae/Freddie Mac Controversy

2008-07-17T07:56:16Z

There has been a lot of talk the past week and a half on Wall Street and through the United States Government about "solvency" issues that Fannie Mae- the Federal National Mortgage Association- and Freddie Mac may be experiencing, the "what if's" were they to collapse without the Government "bailing them out" and the impact it would pose on the existing status of our economy and housing market.

But before we go into those topics....

Who are Fannie Mae and Freddie Mac?

According to the "About Us" page of Fannie Mae's website, "Fannie Mae was created in 1938, under President Franklin D. Roosevelt, at a time when millions of families could not become homeowners, or risked losing their homes, for lack of a consistent supply of mortgage funds across America. The government established Fannie Mae in order to expand the flow of mortgage funds in all communities, at all times, under all economic conditions, and to help lower the costs to buy a home." You can learn more about Fannie Mae at: www.FannieMae.com

According to the "About Us" page of Freddie Mac's website, "Freddie Mac is one of America's biggest buyers of home mortgages, is a stockholder-owned corporation chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of homeownership and rental housing." Essentially, they do the same thing as Fannie Mae.

These two entities are unique in that Fannie Mae (FNM) and Freddie Mac (FRE) are openly traded on the New York Stock Exchange, run like a publicly traded companies and held accountable to their stockholders, HOWEVER, the companies are unique in that they are "government-sponsored enterprises", established by federal law. This unique business structure allots each company "special privileges" in a sense that profits are redistributed through stockholders, but potential losses are passed onto the tax payer! Fascinating...isn't it?!

Both companies are highly regulated on the risks they can take on and hold nearly half of the mortgages owned in the United States!

"Solvency Issues"

Problem:

The major issue brought to the table with regards to Fannie Mae and Freddie Mac revolves around "solvency issues".

By standard accounting principles, it has been claimed that Fannie Mae and Freddie Mac are "insolvent".

I looked up the definition to insolvent on Dictionary.com and here is what I found:

In*sol*vent

-adjective

1.	not solvent; unable to satisfy creditors or discharge liabilities, either because liabilities exceed assets or because of inability to pay debts as they mature.

Source: Dictionary.com Unabridged (v 1.1)
Based on the Random House Unabridged Dictionary, © Random House, Inc. 2006.

Solution?

On July 14^th, The Federal Reserve opened its lending window to Fannie Mae and Freddie Mac to head off any short-term funding problems and on Sunday, July 13^th, Treasury Secretary Henry Paulson outlined a number of immediate steps Congress can take to bolster investor confidence in the two government-sponsored enterprises.

"Stock Woes"

Fannie Mae (FNM)

52 Week Range: $6.68 - 70.57

Closed out this past Wednesday at $9.25/share.

Freddie Mac (FRE)

52 Week Range: $3.89 - 67.20

Closed out this past Wednesday at $6.83/share.

Impact on the Economy

The Treasury secretary and Fed Chairman Ben S. Bernanke made statements recently that they are trying to prevent a collapse of the companies that would exacerbate the worst housing recession in 25 years and deepen the U.S. economic slowdown.

My Take on It

Fannie Mae and Freddie Mac CANNOT and WILL NOT be allowed to fail. As of right now, both companies are as Americana as Coca Cola^TM and the companies will ride out the storm and tensions within the marketplace. If both companies collapsed, we have much further problems to worry about, which the Government won't allow to happen. I'm buying stock to hedge my future tax increases!

-Rate Volatility Meter-

Medium-Rates will take a few increases or decreases through the week, with movements of 0.25%-0.375% within a given day.

Written By:

Scott Gormley

Broker/Owner

Oak Valley Mortgage

Direct: 530-592-8362

Email: Scott@OakValleyMortgage.com

Website: www.OakValleyMortgage.com

"You Find the Perfect Home, We'll Find the Perfect Loan!"

Important Notes on Short Sales

2008-05-14T12:25:01Z

"Short Sales" are a hot topic right now, as homeowners, homebuyers, real estate professionals and lenders simply can't avoid them in today's real estate market. Existing homeowners are calling their lender to see if a short sale is the right "exit-strategy" for them, with little money left to make the mortgage payments. On the flipside, homebuyers are calling lenders daily to find out what financing options are available to purchase one.

Lets start with a good definition of a short sale, as people often mix the concept up with a foreclosure, REO, etc...

Short Sale: The sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes.

Like anything else...there are some great deals out there and there are some really bad ones...Simple logic should tell a perspective homebuyer that if the homeowner was unable to make their mortgage payments, they probably weren't keeping up with the maintenance on the home. In big red letters, each short-sale on the market should read, BUYERS MUST PERFORM THEIR DUE DILLEGANCE AND MOVE FORWARD WITH CAUTION. DON'T ASSUME ANYTHING!

Everyone wants a great deal. And yes, there are some GREAT DEALS out there! I've been looking to purchase a secondary residence in Southern California. Homes that were selling for $550,000-600,000 at the peak of the market 1-2 years ago are now in the $275,000-300,000 range! Certainly things will turn back around and many will stand to do well from a long-term perspective in real estate. Again, I emphasize long-term. Once we get out of the market we are currently in, things will once again rebound. Why? History always repeats itself. Home prices simply need to catch up with the times.

I've personally walked through well over 200 short sale properties in the past few months. After seeing enough of them, you get to see the good, the bad and the ugly. Ugly to where the house would be a great movie set for the next Arachnophobia movie, where you swear it was a homicide scene at some point before you entered. Appliances and fixtures missing...all the way down to the toilets!

In between the search though, there are some real gems!

As people call me to get pre-qualified to find out "how much home they can afford on a short-sale", I note the following items below, as a short-sale transaction can run differently than your normal home seller/home buyer transaction.

Typically, short sale properties are sold "as is" and without warranties from the bank currently holding the mortgage. Banks do this to remove themselves from disclosing anything pertinent to the property, which could ultimately be a problem. Why? They were the lender...not the homeowner. As such, there could be things wrong with the property that they are unaware of and don't want to be held liable for problems down the road. This is why I highly recommend hiring a great inspector to look at the home from head to toe once you have narrowed your search down to 1 or 2 properties. Foundation problems, structural damage, water/mold damage and so on can be very costly to fix.
When dealing with a short sale, don't expect the bank to respond quickly. Every bank is different. You would think the bank is taking a loss and would want the bad loan "off their books" as soon as possible. It's not that the bank doesn't. However, banks are simply inundated with short sales right now. I've talked to bank representatives that have hundreds of files in and around their desk. How does one decide which file gets picked up in the course of a day? I recommend having a great real estate agent that will "go to bat for you" and will be on the phone with the bank first thing in the morning; to make sure your offer and file get looked at over the sea of others. I've seen a direct correlation between clear lines of communication and closed deals as opposed to poor communication and deals that never happen. As such, I can stress the importance of working with a great real estate agent and lender that will help you through the process.
"Low-Balling" the bank's approved short sale asking price can be a no-no. I have several clients that have put offers in for HIGHER than the banks approved short sale asking price, only to not hear from the bank for over 2 months! Yet perspective homebuyers think they can "low-ball" a bank and put an offer in lower than the approved selling price, feeling the bank "won't pass it up" because the bank must be desperate to sell the home. Many times, I have seen otherwise. Remember, banks are essentially throwing money at bad money. They are already taking a loss. If the bank is looking through hundreds of files and choosing which ones deserve the most attention...where will your file and offer lie?
Finally, if the home needs rehabbing or fixing up, I tell people to consider the cost of doing so in relation to other homes on the market which are "turn-key" and ready to move into with little or no money needed.

Written By:

Scott Gormley

Broker/Owner

Oak Valley Mortgage

Direct: 530-592-8362

Email: Scott@OakValleyMortgage.com

Website: www.OakValleyMortgage.com

"You Find the Perfect Home, We'll Find the Perfect Loan!"

Are you looking to refinance a home in Chico,California?

2008-03-31T12:00:47Z

Are you looking to refinance a home in Chico, California?

If so, feel free to give me a call!

My name is Scott Gormley, Broker/Owner of Oak Valley Mortgage and I thank you for considering Oak Valley Mortgage to represent you in one of the largest decisions of your life! We offer home purchase,refinance and debt consolidation services throughout all of California. I graduated from California State University, Chico, with a degree in Business and Marketing. I was the 2006 Chairman of the Chico Association of Realtors Affiliate Committee and I have been committed to our community through fundraisers and events in appreciation for what Chico offers in return, a great lifestyle. I've written weekly articles for over 2 years in the Enterprise Record's "North Valley Real Estate Guide", labled "Mortgage News" and I've written monthly articles for the past 2 years in Inside Out Magazine. If you are looking for a straightforward, no hassle Mortgage Broker that tells you how it is, keeps clear lines of communication throughout the purchase/refinance process and believes in building a foundation of business built on referrals and positive experiences...look no further! I can't stress the importance of working with a reputable company that is "in tune" with the daily (and even hourly)underwriting guideline changes currently taking place at banks and financial institutions, to give you the greatest opportunity for a successful transaction during these changing times in the real estate industry. Feel free to look around our website and contact us with any questions you may have. There is a lot of valuable information within our website that will benefit potential home buyers, home owners, investors and real estate agents. I am committed to providing the best service available to our clients. Oak Valley Mortgage's mission is simple: To build a strong base of repeat clients, built on positive experiences and referrals.

Direct: 530-592-8362

Email: Scott@OakValleyMortgage.com

Website: http://www.oakvalleymortgage.com/

Service - Knowledge - Results

Real Estate Broker, DRE CA License # 01466648

Apply Now

Are you looking to purchase a home in Chico,California?

2008-03-31T11:51:12Z

Are you looking to purchase a home in Chico, California?

If so, feel free to give me a call. I have a great network of local real estate professionals to help you through the home purchase and loan process.

Direct: 530-592-8362

Email: Scott@OakValleyMortgage.com

Website: http://www.oakvalleymortgage.com/

Service - Knowledge - Results

Real Estate Broker, DRE CA License # 01466648

Apply Now

Conforming Loan Limits Temporarily Raised in Orange County, California!

2008-03-22T01:46:00Z

Conforming Home Loan Limits in Orange County, California have temporarily increased from:

$417,000 to $729,750 until December 31^st, 2008

Do you fit into the box of what banks are looking for?

Here's the checklist. If you can answer yes to all these questions, call me!

You're currently in a mortgage rate at (or set to go over) 6%

You have 700+ Mid FICO® scores

All borrowers have a stable job history for the past 2 years

The property is an owner-occupied, single family residence

You have a minimum 20% equity position in the property

You have the ability to provide full documentation of income & assets

You have no mortgage lates in the past 12 months

You want a better mortgage

Sound Demanding?

It is, but it's worth it!

As Non-Conforming rates climb over 8% for a 30 year fixed and continue to rise, now is the time to take advantage of the "Economic Stimulus Package" and get into a great 30 year fixed rate.

Call me today!

Scott Gormley

Broker/Owner

Beach Town Mortgage, Inc.

Direct: 949-916-1460

Website: www.BeachTownMortgage.com

Email: Scott@BeachTownMortgage.com

Wake Up Mortgage Brokers, You're Losing Your Livelihood!

2008-03-10T11:53:42Z

This is a MUST READ for MORTGAGE BROKERS...Nationwide!

THIS IS ALSO A CALL TO ACTION FOR ALL MORTGAGE BROKERS ACROSS THE US!

First off, DO NOT allow Politicians, The MEDIA and others to discount what we do as Mortgage Professionals. We bring value to the table for each of our clients on a daily basis. Many of us could create a lengthy list over the years of the people we have helped in times of need and desperation. We help our clients make sounder financial decisions on the largest investment the average American will EVER MAKE, their home and mortgage.As in any industry, a few bad apples can spoil the bunch. Many of us know that the Mortgage Companies and Brokers referenced in the media are not around anymore, leaving the "true professionals" to pick up the pieces of a tarnished industry. Meanwhile, the puppets in Washington that have no business dabbling in economics continue to disregard what is in the general public's best interests...

Make no mistake about it, with regards to Consumer Financing...

Knowledge = Power

Ignorance = Poor decision making and allows for greed and corruption to exist.

Are we not noticing that our way of making a living as Mortgage Brokers is changing before our eyes, in light of the finger pointing and the "who is to blame?" game for the woes of the mortgage, lending and housing industries, respectively?!

The consumer sentiment and crying of the media have led to irrational decisions, lobbying and the "BIG BOYS", I.E; major U.S. Banks, gaining the much desired power over consumer mortgage financing options.

Just when we think that lenders can't tighten any further, a huge announcement by the conforming agencies and the Attorney General of New York was made last week that will serve to complicate the origination of mortgage business across the United States significantly.

As Mortgage Brokers, when we bring our clients to a major lender, that lender will esentially be a competitor for our repeat business already. According to Fannie and Freddie, we will soon (probably 3-6 months out from now) have to go to the lender and have them select the appraiser for our borrowers. This not only means you may not be able to switch lenders without additional costs...the lender could now control data that puts them in position to capture the loan. They are just one step away to their domination plan and removal of Mortgage Brokers all together. Why? Less competition for the banks and Mortgage Brokers to explain financing options to ignorant and falsely led consumers by TV ads and the such will lead to larger profits off of consumer ignorance. In other words, GREED!

Might I remind you of the infamous slogan that led many consumers across the US into bad decisions...

Lost another loan to ???!!!

The Appraisal changes come in light of the finger pointing and "who's to blame game" for the woes of the mortgage and real estate markets. The theory is that Mortgage Brokers will not have influence over "hyped up values" on homes, which leads to a "falsified market." Ummm...I've never influenced my Appraisers to "come into value" on a clients file with a false number. In fact, none of my Mortgage Broker collegues have EVER imposed values of "what a home should be worth!" to an appraiser. Why would each state have licensing requirements for Appraisers if they are not to be trusted to begin with? Regardless of who orders the appraisal of a home, the following will ALWAYS hold true...

There will always be bad mortgage brokers...as most of us know, those "fly-by-the-night", "make a quick buck" individuals are long gone...

Appraisers are always trying to gain the business of someone, regardless of it being a bank or a Mortgage Broker. If a particular Appraiser that the bank chooses seldom "comes into value" to make the loan work, will the bank continue to lose loans or will they find someone else? Hmmm????

Where is the National Association of Mortgage Brokers on this topic?

Such a large group with the influence and power make our voices heard...or not...

Scott Gormley

Broker/Owner

Oak Valley Mortgage

Direct: 530-592-8362

Fax: 530-592-8362

Email: Scott@OakValleyMortgage.com

"You Find the Perfect Home, We'll Find the Perfect Loan!"

The "Liquidity Crisis", "Economic Stimulus Package" and my "Sleeping Tiger" Theories!

2008-03-07T15:45:04Z

What is the "liquidity crisis" and why does it exist?

Across most of the country, Fannie and Freddie currently purchase loans of $417,000 or less from lenders, and repackage these so-called "conforming" mortgages into securities sold to investors. Investors generally trust that these securities will be repaid, in part because they are backed by the government-sponsored entities, so there's been little interruption in consumers' ability to obtain conforming loans at low rates. Until the Economic Stimulus Package was signed into law, loan amounts over $417,000 were typically held onto as "portfolio loans" by banks or sold off as mortgage backed securities to Investors and Wall Street as "Jumbo Loans." Investors and Wall Street have recently gotten a sour taste in their mouth, experiencing higher than normal levels of default, due to poor underwriting practice, risky loans and a weakening real estate market. The result has been the "liquidity crisis" we are currently experiencing, whereby Investors and Wall Street have virtually put a halt on the purchasing of mortgages over $417,000, explaining why interest rates are currently so much higher for consumers on "Jumbo" loans. Typically, rates are a quarter of a percentage point higher on "Jumbo" loans, but are now roughly 1.625% higher for a 30 year fixed.

The "Sleeping Tigers ", waiting to pounce on the Mortgage Industry

Sleeping Tiger 1

Sleeping Tiger 1 consists of a percentage of bad "jumbo" mortgages(over 90 day delinquent),which are currently sitting on the books of banks with loan amounts over the existing conforming loan amount of $417,000, that will ultimately be sold to Fannie Mae and Freddie Mac under the new Economic Stimulus Package of 2008 (HR5140). The Economic Stimulus Package of 2008 is a bill, which President Bush created and signed into law on February 13^th, to help the "liquidity crisis" we are currently experiencing in the mortgage industry, allowing banks to sell loans from "high-cost housing areas" to Fannie Mae and Freddie Mac at the higher loan amounts (up to $729,750) through 2008, to "free up" capital and write new loans.

Several banks approved and funded loans in the second half of 2007, intending to sell the loans off to Wall Street to "free up capital" for new loans, while retaining the rights to "service the loan", by collecting a percentage of the monthly mortgage as a profit. However, once the majority of Wall Street investors pulled the plug on purchasing "jumbo" loans, the banks were stuck with them! I don't care what bank you are and how much money you have on hand, when it comes down to it, the banks only have so much money of their own to lend out on real estate.

Then came the abundance of foreclosures and short-sales...

The foreclosure process is very expensive. Some sources have estimated it to cost banks upwards of $50,000 to go through the process, in addition to the losses anticipated by receiving less money than is actually due on the property. By no means does the bank want to take and hold property. Their business is that of making worthy investments that return interest on their activities.

I have spoken to several homeowners across the United States having not made a mortgage payment on their home in several months, without even a hint of danger, negativity or the placement of a Notice of Default from their lender! You would think they would be going through the foreclosure or short-sale process right now, but that isn't the case. Why?

Here is my theory...

If a bank has a bad mortgage that is "sitting on their books" with a borrower living in the home that hasn't made the mortgage payment for 3-4 months, and the President has just signed into effect the Economic Stimulus Package, which will now allow Fannie Mae and Freddie Mac to purchase mortgages that were originated as far back as July 2007...why would the bank want to place a notice of default on the borrower, making the file look bad, when they can simply sell off the mortgage to Fannie Mae and Freddie Mac to "free up capital" and remove their hands from a bad loan?

The result is Fannie Mae and Freddie Mac purchasing loans that are now backed by the government-sponsored entities. What happens if they had no idea the file was bad and now they are stuck with a bad loan? That's right...It's you and me, Mr. and Mrs. Taxpayer, which will ultimately need "subsidize" and "bailout" their problems!

Think its farfetched theory? I don't think so at all, but only time will tell.

Sleeping Tiger 2

In a great Bloomberg.com article, written by Bob Ivory, Joe Lents is a "homeowner" in Florida that that has a $1.5 million Washington Mutual mortgage against his property and Mr. Lents hasn't made a mortgage payment since 2002! The bank placed a notice of default against him from the outset and Mr. Lents took the bank to court, contesting that, "he doesn't think the bank holds a valid lien against the property." The judge requested original documentation from the lender to uphold Washington Mutual's claim, but WAMU has been unable to provide the original documentation requested by the court. Many other judges across the United States have been inundated with such issues as well, with many courts siding with the homeowners until the banks prove they hold a valid debt against their properties. To this day, Mr. Lents remains in the home, not making mortgage payments.

What went wrong? As I've mentioned in past articles and referenced the "Mortgage Implosion" website, over 260 lenders have gone out of business since 2006. In the midst of selling notes between each other and poor clerical practices, it should be interesting to see how "sleeping tiger II" plays out in the court systems across the U.S., as delinquent homeowners make desperate attempts to keep the roof over their head while behind on payments. According to Rick Sharga, executive vice president for marketing at RealtyTrac Inc., the Irvine, California-based seller of foreclosure information, 1.5 million homeowners will enter the foreclosure process this year, with half of them actually being repossessed by the banks.

Scott Gormley

Broker/Owner

Oak Valley Mortgage

Direct: 530-592-8362

Email: Scott@OakValleyMortgage.com

"You Find the Perfect Home, We'll Find the Perfect Loan!"

"Conforming Jumbo Loan" Information Released Today!

2008-03-07T15:31:53Z

Are you wondering what is going on with the expected increase in the Conforming Loan Limit set to take place through the " Economic Stimulus Package" signed by President Bush last month?

A chock full of information was released today as to how the "Economic Stimulus Package" and increase in Conforming Loan Amounts for "High Cost Housing Areas" will be implemented into the banking system, which will affect banks offerings to consumers.

If you are wondering what areas HUD has distinguished as "High Cost Housing Areas" within your state on a county by county basis, check out this link (put in the state, without a county for all state results). Please note that the FHA limits have already increased and loans are being accepted using the new limits.

Projected dates of limit increases for Fannie Mae:

Fixed Rate Mortgage 30 and 15 Year...April 1st, 2008.

5/1 LIBOR Arm, Fully Amortized and 5/1 LIBOR ARM I/O...May 1st, 2008.

(These are the dates given by Fannie Mae, individual lenders may vary as to when they will have the Conforming Jumbo programs available to their brokers)

The new matrix for loans accepted by Fannie Mae with the increased limits (Conforming Jumbo Loans) can be found here.

Fannie Mae Guidelines for implementation can be found here.

There are some key things worth mentioning...

Single Dwellings Only (SFR, Condo, PUD)

Manufactured Homes are NOT ALLOWED!

Full Documentation Loans Only

45% Max DTI Ratio Allowed

Existing 2nd Mortgages must be re-subordinated

Cash-Out is NOT ALLOWED (Only minimum to pay existing loan, closing costs and max $2,000 out)

Full 1004 Appraisals Only

Loans must be uanually underwritten for now

Lender Paid and Borrower Paid Mortgage Insurance will be allowed

If you have a home in California on an Adjustable rate mortgage over the existing $417,000 Loan Limit and you would like to take advantage of a "Jumbo Conforming Loan" to save you from the high cost of financing on existing "Jumbo" pricing, feel free to give me a call. We'll go through your individual scenario to see if refinancing into a "Conforming Jumbo Loan" makes sense for you!

Scott Gormley

Broker/Owner

Oak Valley Mortgage

Direct: 530-592-8362

Website: http://www.caloan.com/

Email: Scott@OakValleyMortgage.com

"You Find the Perfect Home, We'll Find the Perfect Loan!"

Prove Yourself To Me..."Youngster!"

2008-02-18T19:00:23Z

Being young in the Real Estate/Mortgage Industry is hard...

Being young in the Real Estate/Mortgage Industry is challenging...

I hear it all from associates that are my age...

There is a stigma about being young and having to prove one's worthiness to clients that are older than you...

Why? Everyone knows that older = wiser...Right?

Not always...

I always get a kick out of older "potential clients" that call me up and want to meet face-to-face. More often than not, I find that they are simply trying to "size me up" or "feel me out" to see if the 28 year old kid knows what he is talking about, when looking to purchase or refinance their home. Being a 28 year old California Mortgage Broker has been a blast thus far! It seldom fails that the 50+ year old "potential clients" look at me as though I have something to prove to them. Prove that I know more than them. Prove that I'm knowledgable enough at what I do to represent them in such a large financial decision. Afterall, "what do I know that they don't?!"

Why do I get a kick out of it?

Typically after an hour, the arms go from being crossed and defensive to open and welcoming.

We are engaged in conversation, as I ask questions, seek answers and engage my clients in making decisions that are based on their goals and objectives...not mine.

I find that many of my "potential clients" end up coming back for more. They grasp onto the youthful, optomistic, go getting attitude that I carry on a daily basis. They take in the knowledge, respect the opinions and look forward to giving a young guy a shot.

I closed a refinance on an 82 year old client last week in Los Angeles. I drove up to her house to hand deliver her check from escrow, sat down and we talked for an hour. After a hug, she sent me on my way with homemade jam and a bag of oranges...That was cool!

Yea, that's what being a young Mortgage Broker in California is all about....

Scott Gormley

Broker/Owner

Oak Valley Mortgage

Direct: 530-592-8362

Email: Scott@OakValleyMortgage.com

Website: www.CALoan.com

"You Find the Perfect Home, We'll Find the Perfect Loan!"

California Mortgage Broker Fiduciary Responsibilities

2008-02-15T10:38:43Z

I received an interesting inquiry this morning, which I would like to post for all to see. The person that asked the question shall remain anonomyous, but I think the response and your feedback/input as California Mortgage Brokers and consumers is important to bring light to the topic in a time of dissaray and finger pointing on the woes of defaults and foreclosures within our state.

Here's the big question...

In California, mortgage brokers technically have a fiduciary duty to borrowers, but it is not enforced.

Could you please clarify that?

Thanks!

~Anonomyous

Here is my response...

Hello XYZ,

Per the Department of Real Estate website, found at http://www.dre.ca.gov/

"A person who provides brokerage services to a borrower in a covered loan transaction by soliciting lenders or otherwise negotiating a consumer loan secured by real property, is the fiduciary of the consumer, and any violation of the person's fiduciary duties is a violation of this law."

"A broker who arranges a covered loan owes this fiduciary duty to the consumer regardless of whom else the broker may be acting as an agent for in the course of the loan transaction."

Are you asking for clarification on why you believe fiduciary responsibilities are not enforced?

I believe they are..if...the borrower calls the broker on it and it stands before the courts to rule on. If the broker doesn't get called on something they did that wasn't in the best interests of their client, it's typically greed and self-fulfilling. I stress the importance of this to my clients, when working on their behalf. We do what is in my clients best interests, not mine...

If you are asking specifically what our fiduciary responsibilities are, that is open to interpretation in the courts, based on the description I gave you above.

Here is a great article I ran across on the topic.

Does that answer your question?

Scott Gormley

Broker/Owner

Oak Valley Mortgage

Direct: 530.592.8362

Email: Scott@OakValleyMortgage.com

Website: http://www.oakvalleymortgage.com/

"You Find the Perfect Home, We'll Find the Perfect Loan!"

President Bush to Sign "Economic Stimulus Package" Today!

2008-02-13T10:38:47Z

Conforming Loan Amounts Will Increase...

This is great news for California Homeowners!!!

President Bush will sign the "Economic Stimulus Package" Bill today, after Congress and the Senate have agreed to temporarily increase the Conforming Loan Limit in 2008 as a part of its "Economic Stimulus Package", up to $729,750 in "High Cost Housing Areas!"

As you can imagine, most of California consists of "High Cost Housing" areas!

I say up to $729,750 for a reason. The Conforming Loan Limit will be determined by marking up the area median sales price by 125%.

As home values remain shaky and underwriting guidelines get stricter, the time to refinance out of your "Jumbo", adjustable, or second mortgage with a high interest rate and into a 30 year conforming fixed is NOW!

So, what does this mean for you?

The increase in the Conforming Loan Amounts will allow California homeowners and homebuyers a short window of opportunity through 2008 to get out of or avoid high interest rate "jumbo" loans and second mortgages with a Conforming loan at a great rate!

30-Year Conforming rates are currently in the 5% range with NO PREPAY!

How do the terms on your first and second mortgage look?

The increase in the Conforming Loan Amounts will also allow California homeowners to get out of their continuously increasing adjustable rate mortgages!

What does this mean to the current state of the lending industry?

Banks will now be able to sell the "jumbo loans" loans that are "sitting on their books" for loan amounts over the previous Conforming Loan Amount of $417,000 to Fannie Mae and Freddie Mac, in order to "free up" funds for new loans, reducing the liquidity problems the lending industry has been facing. The Bill signed by President Bush on Wednesday will affect home loans originated between July 1^st, 2007 and December 31^st, 2008.

When will the changes go into effect?

Although the Bill went into law immediately after President Bush signed it, the following will need to take place, before banks and investors begin to offer the revised Conforming Loan Amounts to consumers:

1.) Fannie Mae, Freddie Mac and FHA must assess their internal impacts to determine the delivery approach they will require of mortgage lenders and investors.

2.) Fannie Mae, Freddie Mac and FHA must communicate their requirements to mortgage lenders and investors.

3.) Banks will work to identify the impacts on their business and implement the changes as needed.

I expect the process to take 2-4 weeks.

In the meantime, I'm telling homeowners to call me or their mortgage broker. That way we can look over your situation to make sure that all of your "ducks are in a row" for when the time comes to take advantage of the opportunity presented by Uncle Sam to help our economy and your wallet.

As always, I offer a free, straightforward, no hassle, and no obligation analysis of your current mortgage situation.

Call me today to see if we can put your finances into a better situation!

Scott Gormley

Broker/Owner

Oak Valley Mortgage

Direct: 530-592-8362

Website: www.CALoan.com

Email: Scott@OakValleyMortgage.com

"You Find the Perfect Home, We'll Find the Perfect Loan!"

Conforming Loan Limits to Temporarily Rise over $700,000 in California?!

2008-02-05T10:39:11Z

Don't miss the boat when the Conforming Loan Limit increase comes, as it will be temporary! Call me or your mortgage broker to go through your current mortgage scenario, so you can be prepared when the time comes to take advantage of the temporary rise and lower your interest rate into much better terms in 2008!

The current conforming loan limit in California stands at $417,000, which is the maximum loan amount that government-sponsored enterprises like Fannie Mae and Freddie Mac may purchase or guarantee loans on the secondary market.

Under the terms of the "economic stimulus package", the conforming loan limit would temporarily rise over $700,000 in "high cost areas", such as California.

I can't stress the importance of increasing the Conforming Loan Limits in California, as I've been an advocate of increasing the limits for some time now.

William E. Brown, President of the California Association of REALTORS® states, "Currently, Californians are forced into more expensive non-conforming jumbo loans, decreasing homeownership opportunities for many and forcing others into more costly, and often riskier, loan products.

As rates are in the high 6% to 7% range on Non-Conforming loans right now, all of those homeowners in adjustable rate mortgages would be able to refinance into a Conforming loan amount in the 5% to low 6% range, saving them thousands of dollars in interest and putting them into much better loans!

The Office of Federal Housing Enterprise Oversight (OFHEO) continues to fight against increasing conforming loan limits.

Please get the word out there on the importance of this matter, as it will help the California housing market recover much faster!

In the meantime, for all homeowners that find their existing first mortgage or combined first and second mortgage balances over $417,000, I would highly recommend that you contact your mortgage broker to get the pieces in place to take advantage of this opportunity when it ultimately presents itself to California homeowners. As always, I offer free, no obligation and no hassle home loan assessments to see if we can put you in a better situation then you are currently in.

Scott Gormley

Broker/Owner

Oak Valley Mortgage

Direct: 530-592-8362

Fax: 530-267-5555

Website: http://www.CALoan.com/

"You Find the Perfect Home, We'll Find the Perfect Loan!"

Pulling the Plug on Home Equity Lines of Credit

2008-02-02T10:35:17Z

Countrywide Financial Corp. (CFC) sent letters to 122,000 customers last week telling them they could no longer borrow against their credit lines because the total debt on the home exceeded the market value of the property. The lender says it is using computer modeling to determine which of its customers would have their cash spigot shut off.

Among the lenders tightening as the Fed loosens, Chase Home Lending (JPM), which has been slowly raising credit standards since last summer, will start imposing new guidelines Monday that further restrict who will be granted a home equity line, the company said. This week, California homeowners can tap as much as 90% of the equity in their homes. Starting Monday, however, Chase won't let homeowners in certain parts of the state -- including Los Angeles, Orange and Imperial counties -- borrow more than 70% of the value of their homes.

Scott Gormley

Broker/Owner

Oak Valley Mortgage

Direct: 530-592-8362

Website: www.CALoan.com

"You Find the Perfect Home, We'll Find the Perfect Loan!"

Conforming Loan Limit to $725,000 For California?

2008-01-25T17:38:16Z

I can't stress the importance of increasing the Conforming Loan Limits in high cost areas, such as California.

Below is a letter to California Association of REALTORS® members, on behalf of it's President, William E. Brown.

Please get the word out there on the importance of this matter, as it will help the California housing market recover much faster!

As rates are in the 7% range on Non-Conforming loans right now, all of those homeowers in adjustable rate mortgages would be able to refinance into a Conforming loan amount in the 5-6% range!

Let your voicees be heard!

Scott Gormley

Broker/Owner

Oak Valley Mortgage

Direct: 530-592-8362

Email: Scott@OakValleyMortgage.com

Here's the letter:

Dear C.A.R. Member:

Congressional leaders and the White House today reached agreement on a proposal to increase conforming loan limits as part of a larger economic stimulus package. Raising the conforming loan limits to more accurately reflect the cost of housing in California and other high-costs areas of the nation has long been an objective of C.A.R. While the details remain to be seen, this is a huge win for Californians. As REALTORS®, we should be proud of the role we have played to achieve this goal.

Currently, Californians are forced into more expensive non-conforming jumbo loans, decreasing homeownership opportunities for many and forcing others into more costly - and often riskier - loan products.

Under the terms of the proposed stimulus package, the conforming loan limit -- the maximum loan amount that government-sponsored enterprises like Fannie Mae and Freddie Mac may purchase or guarantee on the secondary market -- will be raised from $417,000 to as high as $725,000 in high-cost areas.

This is great news. But our work is not done. The Office of Federal Housing Enterprise Oversight (OFHEO) continues to oppose adjusting conforming loan limits. With your help, C.A.R. will continue to advocate for this much needed reform. Stay tuned.

Sincerely,

William E. Brown
President
CALIFORNIA ASSOCIATION OF REALTORS®

A Bleeding America and Lots of Band Aids

2008-01-23T09:49:52Z

President Bush's "Rate Freeze"

The "Countrywide Bailout"

The "Rebate Check" and a "Possible Recession"

The Value of a US Dollar

Social "In-Security?"

Every once in a while, I need to write an article that isn't entirely mortgage industry specific, but rather broad. Why? Many other elements affect the housing and mortgage industries and the housing/mortgage industries affect many other elements of our economy and society.

I find myself wondering often now, "Does the average person realize the trouble that our country is in?!"

Maybe it's because I look into my 13 month old daughters eyes and question how our actions now will directly affect her life.

I'm not a "Doom and Gloom" person by any means. In fact, being a business owner, I'm actually very optimistic and a part of the entrepreneurial spirit to which our country was founded and thrives on. However, our country is on the brink of major problems. Unfortunately, few care how the economy works (and fewer comprehend how it works) on a micro and macro level, and what can be done to help fix it. Meanwhile, we have a Government that continues to make decisions for us, putting "band aids" on top of the wounds of our country. Surgery isn't performed the way it should, to go in and correct the problem directly, rather a "quick fix" band aid is placed on top of problems, which often fall off when it starts to rain again. I ask this...

Would you rather lose a limb or die a slow bleeding death?

What our country needs to do is allow the free market to run its course and correct itself, WITHOUT GOVERNMENT INTERVENTION. Otherwise, we have a "falsified capitalistic market" that isn't transparent and will only continue to eliminate the middle class and create a major gap between the wealthy and the poor. I'm sure the large majority of readers of this article will be in the middle classes.

President Bush's "Rate Freeze" Proposal

I wrote an article recently, labeled "Bush's Bogus Rate Freeze." Our President's course of action to address the "sub-prime meltdown" was to sit down with the banks that made risky mortgage loans and ask them to put a "rate freeze" on sub-prime mortgages that were set to "readjust" to much higher payments. Payments that would probably mean an estimated payment increase of 1.5 times their current payment. Meanwhile, the borrower gets to live in a home with a current payment that is probably more then what they could afford by standard Underwriting guidelines to begin with! Yes, some of these poor souls were victims to mortgage fraud. Most of them were fully aware of their poor decisions and are now being rewarded for it. Regardless, they were approved, more often than not, on "Stated Income/Stated Asset" loans, where their ability to repay the loan was never confirmed. I have 3 problems with Bush's rate freeze as a "band aid."

Problem 1

You are essentially dragging out the inevitable foreclosures 3+ more years, to avoid a larger number of them on the market all at once now. If a person can't afford the "recalculated" payment now, it is likely that they won't be able to afford the recalculated payment in the near future. Let the market correct itself with a "hands off approach" and homes values will rebound much faster, even if there are more foreclosures on the market upfront.

Problem 2

The proposed "rate freeze" would only affect sub prime borrowers. How fair is it to help one group of borrowers (that had bad credit to begin with) and turn a blind eye to good borrowers with excellent credit that can't afford the reset payment on their adjustable rate mortgages facing foreclosure as well? It's simply not fair.

Problem 3

You are allowing the Government to interfere with the free, capitalistic market of risk and reward. The banks, investors and borrowers all took a bad risk that didn't pan out. Freezing interest rates on third parties investments will only create less desire by Wall Street to invest in Mortgage Backed Securities once again, continuing the "Credit Crisis" we are now in. Freezing rates belittles their investment and expected rates of return, which will turn them towards other investments with less risk of Government intervention (or persuasion) and the same returns.

The "Countrywide Bailout"

Countrywide Home Loans was the Number 1 lender in the United States. Number 1! And they were facing major problems, which very few saw coming. I saw many of the signs before others, and it had the potential to affect millions. I wonder how many shareholders of Countrywide stock would have saved thousands of dollars, had they read my article, "The Countrywide Controversy?" You think Enron was bad? Now you're talking about millions of home loans across that United States that could possibly be orphans!

But Uncle Sam couldn't allow that. Why? It would be devastating to our economy. As such, everyone looked around at who could take on such a task. Yes. Bank of America to the rescue. But why would a financially sound company take on Countrywide for a combined $6 Billion that has class action lawsuits against it in several states and a poorly performing sub-prime loan portfolio, with an increasing amount of foreclosures? Some say it's because Bank of America sees the takeover of Countrywide as an opportunity to learn all of the "state of the art, behind the scenes operations of the number 1 lender in the United States, which did it better then anyone else" Ummm...If you did it better then anyone else, you wouldn't be selling your interests in the company to Bank of America to begin with!

Behind closed doors incentives from Uncle Sam maybe? Being able to write off substantial losses from their books with some additional love from the American Taxpayer? The banking industry and lending industry are regulated by two different entities. Maybe Bank of America saw an opportunity to enter into a different business, which doesn't require them to have a 10% regulated safety net on deposits? Had Countrywide gone bankrupt, the financial markets would have been in distraught. Yes, even more so than they are already. I think the overtaking of Countrywide by Bank of America still has a lot of revealing to do, especially as B of A looks deeper into Countrywide's portfolio and business practices. In the meantime, it will act as a great band aid for the economy and only time will tell.

The "Rebate Check" and a "Possible Recession"

On January 18^th, President Bush called for a short-term $140 billion economic stimulus package to help give the sagging U.S. economy a "shot in the arm", which now stands before Congress to keep the United States out of a recession. In 2001, every tax payer received a "rebate check" of $300 for an individual and $600 for a married couple.

An October 2002 paper by the National Bureau of Economic Research said that roughly 20 percent of Americans spent the checks. Nearly a third of the people who got checks saved or invested the refund, and the rest used it to pay off bills or debt. In 2008, President Bush is proposing up to an $800 "rebate check" for individuals and $1600 for married couples, which could be seen as early as Spring 2008. The idea is to get people to spend money and stimulate the economy. The catch is, the "rebate check" is really a loan, not a rebate! Do you really think every American taxpayer "overspent" on paying their taxes somewhere and a Government that is in a major deficit "owes us a rebate?" No, not really! Accepting a rebate check in 2008 will be an advance on the refund you'll get when you file April 2009. What happens if you actually owe money on your 2009 taxes? Hmmm! The old saying, "there's no such thing as a free lunch" will still hold true!

See what happened to your 2001 "rebate" here: http://www.truthorfiction.com/rumors/t/taxadvance.htm

All of the talk now is about avoiding a recession. I pose the thought that we have been in a recession for some time now and it was just masked really well by the housing market. As home prices escalated over the past few years, homeowners had a false perception of their net wealth, thinking, "Wow, my home is worth $200,000+ more dollars then I bought it for a few years ago?!" This created a very large group of consumers across the United States that were "living the American Dream" and treated their homes like ATM machines, buying cars, boats, vacations and many other things. But, would those individuals have spent that money and purchased those items if their home was still worth what they purchased it for? Probably not! And now, their homes are trickling back down in value and they may even owe more on the home then what it is worth!

The Value of a Dollar

The continuous deflation of the U.S. Dollar is a major problem that worries me. Have you read a dollar bill recently? It says, "THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE." LEGAL U.S. TENDER that at one point was backed by gold at Fort Knox and the U.S. Treasury. Every dollar in global circulation had gold behind it. As the United States Government continues to print off U.S. currency that doesn't have gold to back it up, what happens to the value of our currency? Yes, it gets devalued. And such is the case with our dollar today. You get less "bang for your buck", far less! My grandfather was a butcher that raised an entire family of 7 in a 2,500 square foot home on a butcher's wage. Now, I see married couples with dual incomes, earning over $125,000 combined that can barely pay the bills at the end of the month, living in a condo with 2 children! What type of lifestyle are we leading ourselves into in America? Foreign interests are now looking at the United States as a bargain, because their currencies are so much stronger then ours. No wait...they're looking at our country as a steal! What will happen to the United States job economy of the future, as foreign interests grow stronger and hold a larger stake in the United States economy? A large portion of the existing U.S. workforce is the retiring Baby Boom generation, which counts for 25% of the existing workforce, according to the U.S. Bureau of Labor Statistics! How will that look on our GDP numbers?

I think Americans need to go "back to the basics." I see far too many people that live above and beyond their means in mine and my parents' generation. The power of the marketing dollar has led our society into thinking what we ought to be, instead of what really counts and what we should be.

Relying on "Social In-Security?"

As of now, my dad is 56 and expected to receive 75% of his estimated Social Security disbursements. Will fiscal policy change that to 50% by the time he is eligible?

What will you get? I'm 28 and expecting none of it!

Wake up America! 2008 is an election year.

Will your voice be heard in these important times?

Scott Gormley

Broker/Owner

Oak Valley Mortgage

Direct: 530-592-8362

Fax: 530-267-5555

Email: Scott@OakValleyMortgage.com

Website: http://www.caloan.com/

"You Find the Perfect Home, We'll Find the Perfect Loan!"

Learning to Love Your Mortgage!

2007-12-17T12:04:47Z

Many hate their mortgage. They hate working hard everyday, only to make that BIG PAYMENT at the beginning of the month. For the millions of homes in adjustable rate mortgages, they hate not knowing how much their mortgage is set to increase on a month to month or yearly basis. So, "What typically happens when a person hates something?" They avoid it! I'm not talking about avoiding their mortgage payments, although some do that. I'm talking about how many homeowners avoid having an intimate relationship and understanding with the type of mortgage they currently have and whether it is still (or ever was) the right type of mortgage for them!

Love takes time, devotion, an understanding, patience, open and willingness to learn and listen and setting the course for a happy future. I pose you apply those fundamentals to your mortgage, and here's why!

A poll commissioned by BankRate.com in 2007 showed that 34% of homeowners, when asked, "What type of mortgage do you currently have?" were clueless. 1 out of 3!

Source: Bankrate.com 2007

That number is very disturbing to me, especially with the vast changes that have taken place in the housing and mortgage markets since they purchased or refinanced a few years ago. I'm especially concerned with those homeowners in adjustable rate mortgages with "teaser rates", which are set to "reset" to a much higher payment and those in "Option Arm", "Pick a Payment" or "4 Payment Option" loans, which allow for negative amortization (where the minimum payment will actually increase your mortgage balance, because you are paying less than the actual interest due to the bank!)

During the refinance and housing boom we experienced over the past few years, many "mortgage professionals" entered into the mortgage industry. Why? The answer is simple; Money! Salespeople from every profession you can think of were showing up at the doors of mortgage companies across America to get in on a "piece of the action". A few mortgage companies I witnessed first hand (which are now out of business), were little more than a license on the wall and hundreds of telemarketers. These telemarketers had little knowledge of the business that were answering phone calls, simply quoting rates and "winging it!" Scary stuff! Especially for the misguided homeowners that took a person's word for face value with little credibility. I vowed to never run my mortgage companies like that.

Now, many of those "mortgage professionals" are no longer in the business, because the phone calls aren't pouring in as they once did. Much of the mess that we have today is due to the "blind leading the blind". Borrowers don't understand mortgage financing and the "mortgage professionals" and telemarketers learned jargon to sound professional, but still had little understanding about the mortgage products they were selling to people. My dad has been in the mortgage business for close to 30 years and he still doesn't claim to know it all. How can a person that has been in the business for a few months replace that?

I propose that many of you, once again, "rekindle" your relationship to your mortgage. Pull out the old paperwork you signed a few years ago and try to avoid. Call a true mortgage professional, who will help you to understand the type of loan you currently have and whether it still is (or ever was) the right loan for you. Within the same poll referenced above, people were asked, "What do you plan to do when your ARM loan readjusts?" Here are the results:

Source: Bankrate.com 2007

I have always believed in empowering my clients to make better, sounder decisions, with regards to their mortgage. When a refinance or purchase transaction is over, the borrower should walk away, knowing exactly what their mortgage is about. Removing your fears of the "unknown" will once again help you to love the benefits of homeownership. Interest rates have dropped significantly, especially on 30 year fixed rates. Feel free to give me a call; I'd love to spend the time and go through your scenario with you!

Scott Gormley

Broker/Owner

Oak Valley Mortgage/Beach Town Mortgage Inc.

Direct: 530-592-8362

"You Find the Perfect Home, We'll Find the Perfect Loan!"

Looking for a California Generation X Mortgage Broker?

2007-12-14T16:23:26Z

Are you looking for a California Generation X Mortgage Broker?

One that uses technology to stay on the cutting edge, saving you time, money, hassles and confusion by keeping clear lines of communication throughout the entire loan process through the latest means of communication...

One thing has become clearly obvious to me, since I have been in the Real Estate/Mortgage business....

There is a large discrepency between those Real Estate professionals that "streamline" the real estate/mortgage process and there are those that choose not to adapt to the changing times. Why? It's hard, different and human nature for people to get in a "comfort zone" and simply not want to change.

When my dad started in the Mortgage business over 25 years ago, the home loan process would literally take 2-3 months! Now, with the use of cell phones, pda's, laptops, fax machines and other devices, the process is much faster. Atleast...for some...

With Oak Valley Mortgage and Beach Town Mortgage, I tell my clients to get a hold of us within 3 weeks of wanting keys to a home or their existing mortgage refinanced.

I have formed my companies around the basis of being as "super-streamlined" as possible. What does this mean for you as a client?

-Less Hassles and Faster Turn-Around Times!

-Reduced Overhead, allowing us to pass the savings to you!

-Your complete California home loan application can be filled out on our secure website!

-All of your faxes are saved as a pdf file, which are saved and forwarded to the banks, saving valuable time and trees.

-We have 24/7 access to "pull up credit reports" from all 3 credit bureaus. We always send our clients a copy of their tri-merge credit report via email within minutes of ordering it. This allows us to look over the credit report together to find discrepencies to be resolved.

-We carry iPhones, allowing us constant access to emails for clear lines of mobile communication!

-We use Instant Messangers!

Feel free to call me if you have any questions. I leave myself readily available to our clients, especially on the weekends!

Scott Gormley

Broker/Owner

Oak Valley Mortgage and Beach Town Mortgage, Inc.

Direct: 530-592-8362

Email: Scott@OakValleyMortgage.com

"You Find the Perfect Home, We'll Find the Perfect Loan!"

Bush's Bogus "Rate Freeze" Plan

2007-12-11T12:43:29Z

They don't have the answers, because they don't even know the right questions.

Let me start off by saying that I strongly oppose the proposed 5-year "rate freeze" plan that President George Bush has suggested to the American public in regards to subprime loans set to "readjust" to higher interests rates, with the ambition to "curb" the number of foreclosures set to take place in the housing market over the next 24 months.

I pose this question, "How can Uncle Sam get that right when the President can't even put out the right toll-free number on December 6th, while making a public address on national television, promoting the new "Hope Now Hotline" set up by his administration?

President Bush stated, "And I have a message for every homeowner worried about rising mortgage payments: The best you can do for your family is to call 1-800-995-HOPE. That is 1-800-995-H-O-P-E," he said.

Anyone who dialed 1-800-995-HOPE was greeted by just a busy signal, because the correct "Hope Now Hotline" number is 1-888-995-HOPE.

I'll set the stage, so you can see the "Big Picture" and flaws in President Bush's "rate freeze" plan.

Back in the old days, you would walk into a bank and apply for a home loan. You had a relationship built with that bank. They knew your ability and willingness to make good on borrowed money, and you knew where to go to make payments and find them if needed. You knew who "carried the mortgage" on your home and you would have the ability to sit face-to-face and "renegotiate" terms if you were in trouble, as long as it was agreeable to both parties.

In reality, very few mortgages today are "portfolio" loans, held by the original bank that underwrote the loan and lent you money. Why? The banks would rather make a loan to you with a set profit, "service" all of the home loans they underwrote for a small fee every month and "free up" their capital by selling off the loan on the secondary market to investors to make new loans. This system creates much less risk for the bank, since those loans underwritten are not on their balance sheets, rather, in the hands of investors.

So, here's what generally does happen today.

Let's say your name is Bob. 10 Bob loans will be "bundled together', which have similar characteristics, to be placed into a "mortgage backed security", to be sold on Wall Street to investors in the US and across the world. You may be paying Wells Fargo or Countrywide for your mortgage every month, but an investor in Japan may actually "hold" your mortgage.

Now think about this. You are a full grown adult that has entered into a "legal binding contract" to make good on the mortgage. Meanwhile, you have the bank that is typically just "servicing" the loan and an investor (Note that not all investors are "Big Time Wall Street Investors!" Potential losers include; pension funds for teachers, firemen, police and an array of mutual funds, whose clients are individual investors.) Now the US Government steps in and says, "We're going to freeze interest rates on your investment for 5 years!" Let me ask you, what investor in their right mind would allow anyone to devalue their investment? Especially the Government!

Do you see the fundamental flaw? Times have changed and the way that our mortgage system works is much more different and complex then the old days. If we are to see a "free up" of capital into the mortgage markets to lend money again, there needs to be confidence on Wall Street that Uncle Sam isn't going to step in and "freeze" their investments. Otherwise, most investors will take their money elsewhere, with less risk and the same returns. When investing in "subprime" loans, investors took the "calculated risk" that those mortgages might end up defaulting or going into foreclosure. Why? The returns are better. Again, we are setup as a risk and reward economy folks.

One of the main reasons why the Real Estate market is having trouble right now in the US, with an abundant amount of homes on the market, is the lack of money being instilled back into the mortgage process by investors, creating "liquidity issues" for banks and purchase money for homebuyers. The hold up is due to investors not being happy with the underwriting practices of lenders. After all, once it's off their books, "it's not their problem!" The free market is now driving the mortgage industry to go back to the fundamentals of underwriting with higher credit score requirements, lower loan to value ratios and the documentation of income, assets and job history. If "mortgage backed securities" stop selling on Wall Street because of Government intervention, the flow of money for banks to lend out on will "dry up" even more, creating less "willing and able buyers" to buy homes in the "buyers market" we are currently in.

To that thought, I pose a few major fundamental questions that need to be answered in regards to President Bush's "rate freeze" plan.

1.) Do you think President Bush's plan is really about helping homeowners or more about covering the "ASSets" of lenders?

Certainly, from a political standpoint, it looks great in the American eye that you're trying to do something. However, many have stressed that this is nothing more than a political ploy around an upcoming election year to make it appear as though they are actually doing something about the foreclosure/lending problem. Presidential contender Sen. Hillary Clinton is already talking about stretching it to seven years, and that bidding war has just begun.

If you dissect President Bush's plan, two main criteria need to be in place in order to be eligible under the "rate freeze" plan:

A.) You can't have any past or current mortgage lates on your mortgage

B.) You must have less than a 3% equity position in the property.

To me, that sounds like you're trying to entice subprime homeowners to pay their mortgage on time, when they probably would have walked away from their home, because the loan was set to "readjust" to a higher payment they couldn't afford in a home that is worth less then they could sell it for.

In my mind, you are only delaying the inevitable. The idea of carrying out the foreclosures for an additional 5 years will only drag out the "market correction" that MUST take place for home values to be in line with incomes once again!

2.) Why should those with bad credit, living in homes beyond their means be rewarded, while those that are in the same position with good credit be ignored?

There needs to be a level playing field!

3.) What ever happened to a Capitalistic, free market?

One of the joys of living in the United States is the ability to make your own free decisions, based on a risk and reward system. Should you make good decisions, you will most likely be rewarded. On the flipside, should you make bad ones, you may take a loss. Trust that I have compassion for families that are set to lose their homes. Certainly, no one likes to see that and it is bad for the psyche of our country. But a "rate freeze" doesn't enable the person that made bad choices to make better ones. In fact, it only breeds more bad decisions by rewarding bad past decisions.

Honoring contracts and property rights is absolutely essential to the proper functioning of a free society and free economy. A mortgage is a binding contract between consenting adults. A mortgage-backed security is private property. It is the antithesis of a free market for the government to fix prices, pressure mortgage service companies into renegotiating contracts, and thereby expropriate property rights of those stuck holding mortgage-backed securities

So there you have it. President George Bush's "Rate Freeze" plan. One that lawyers will have a field day on, as contracts are enforced and securities are jeopardized, while the faith in the current mortgage system by investors is lost!

I urge you to get the facts and voice your opinion.

Here are some quick facts about President George Bush's "Rate Freeze" plan:

How many will be affected? The estimated number of loans affected by President Bush's proposed plan will be between 145,000 and 360,000.

Which adjustable-rate mortgages are affected? To qualify to have their interest rate frozen for five years, home owners must have received a loan sometime between Jan. 1, 2005, and July 31, 2007, and be facing a reset of their interest rate sometime between Jan. 1, 2008, and July 31, 2010.

Who qualifies for this deal? Home owners who haven't missed a payment, but who might if their mortgage resets. Those who can't afford the higher payments, and who have credit scores below 660 and less than 3 percent equity in their homes, will get the biggest break from the lenders. People who are financially secure enough to pay the higher mortgage payments don't qualify.

Do owners of second homes or investors qualify? No. The plan excludes people who don't live in the property that's facing foreclosure.

Written By:

Scott Gormley

Broker/Owner

Oak Valley Mortgage

Direct: 530-592-8362

Email: Scott@OakValleyMortgage.com

Website: http://www.caloan.com/

"You Find the Perfect Home, We'll Find the Perfect Loan!"

A Prayer for Wayne Harder's Family

2007-11-27T17:48:02Z

My thoughts and prayers go out to Wayne Harder's family and friends after a tragic car accident in Chico,California on Sunday evening. I had the privelage of talking with Wayne a few times and he was a good man and a leading example of what it means to be a community leader and Chico REALTOR®.

Respectfully,

Scott Gormley

Warning! Sensative Mortgage Topic

2007-09-22T13:28:43Z

This is a warning as it is a sensative mortgage topic. But, you can always count on me to "open up a can of worms" and stress my opinion. I received a disturbing email on Friday, informing me that a few MAJOR BANKS are rolling out new home loan guidelines to protect their ASSets...Or are they?

I saw the new guidelines in Black and White.

Like many other areas in the United States, California has been experiencing a higher level of forclosures and notices of default. As a result, these MAJOR BANKS are now rolling out new home loan guidelines, which give "RISK ASSESSMENTS" to specific counties that are showing signs of DISTRESS. Yes, counties that have higher notice of default levels,foreclosures and lowering property values.

Based on the category the county falls into, decides the max loan to value that the Banks are willing to write loans on.

To that, I throw this spin on the topic...

Is this not Redlining?

I believe it is. Back in the hayday, banks wouldn't lend money in areas that were populated by minorities. And now, it is coming back around in full scale!

Why? Most of the counties in California that were on the list had weaker job economies, which indirectly points to less educated individuals with lower income levels. It's not picking the color of a person's skin, but it is certainly picking out a demographic group!

What's your opinion on the topic?

Scott Gormley
Broker/Owner
Oak Valley Mortgage
2006 Chico Assoc. of Realtors Affiliate Chairman
Direct: 530.592.8362
Fax: 530.267.5555
Website: http://www.CALoan.com

Blog: http://www.CARealEstateBlog.com

"You find the perfect home, we'll find the perfect loan!"