Mortgages in Ann Arbor's Blog

Quick Hit: Subprime insurers' losses approaching those of Hurricane Katrina

Mark Miller - Flagstar Bank — Sun, 16 Mar 2008 22:11:58 -0500

I just read this story in Bloomberg and it made me do a double take, then step back and think. Subprime insurers have taken losses of $38 Billion compared to $41 Billion in claims from Katrina.

The enormity of the situation is truly staggering. . . just saw it and thought I'd share.

The Fed worked overtime this weekend

Mark Miller - Flagstar Bank — Sun, 16 Mar 2008 21:18:34 -0500

The Federal Reserve took extraordinary steps this weekend to stabilize the credit markets. The first Blockbuster move was that it facilitated J.P. Morgan Chase'sacquisition of the Giant Wall Street investment bank Bear Stearns for $2/Share(!?!) Makes me wonder what we don't know. . . Now, I'm for free markets, and normally against government involvement in private enterprise, but this feels different. If Bear Stearns went belly up and defaulted on its obligations, it would cause panic across Wall Street and further freezing of the credit markets, which could have a cascading effect reminiscent of the 1930s. I think the fed did well. They're on top of the situation, creative, and decisive. This should instill confidence in the markets, helping to stabilize the situation.

The other major move on Sunday was the Fed's lowering of it's discount window interest rate to 3.25%, and the introduction of a new lending facility utilizing that rate which includes "non-bank" financial institutions, and allows mortgage instruments as collateral. So what's all this mean? It means that mortgage companies will be able to get unsold mortgages off their books, free up cash, and make more loans. We'll see more "Jumbo" loans available at reasonable rates and we'll also probably see some guideline exceptions here and there. Hopefully, we should see lower rates on both conforming and non-conforming mortgages resulting from a renewed confidence in the mortgage market.

Well, the Fed's on the situation, and it should be another interesting week on Wall Street.

The Fed worked overtime this weekend

Mark Miller - Flagstar Bank — Sun, 16 Mar 2008 21:17:39 -0500

Well, the Fed's on the situation, and it should be another interesting week on Wall Street.

Where's the "Cheese"?

Mark Miller - Flagstar Bank — Mon, 10 Mar 2008 22:00:24 -0500

Four weeks ago I was on a Boeing 757 en-route to Phoenix with both of my parents, my wife, and my five and seven year old sons. My "baby" sister was getting married, and we were taking full advantage of it. We jumped on the opportunity to take the whole family for a vacation, and leave the foot of snow and sub-zero temperatures for Sunshine, 74 degrees, and world class golf.

As I was leaving the office, I stopped and asked a co-worker if she had a good book that I could borrow for the plane. She pulled a thin hardcover off of her shelf titled Who Moved My Cheese by Spencer Johnson, MD. I had heard of it, some people said it was a "cute" book - not quite a raving review, so I lowered my expectations, and figured that I'd get started on it after my two young boys got settled in on the flight. So when my Justin, my five-year-old was mystified by the miniature landscape below, and Andrew, my seven-year-old was fully engaged in his "Lego Star Wars" video game, I pulled the book out, opened the cover, and started in on it. I had no idea how much relevance I would find in that book.

The book is a parable about dealing with change. It's a light hearted, fast moving, easy reading story with large print and big margins, (A stark contrast from the last book that I read, Alan Greenspan's The Age of Turbulence) but it's a wonderful book that will hit bulls-eye for anyone in the business today. The story involves two mice and two "little people" who live in a maze, and have become complacent because they had found a seemingly endless supply of cheese. The book follows the mice and little peoples' reactions and resolution to their dilemma when the cheese suddenly disappears.

Who Moved by Cheese really hit home for me. I found myself applying the parable to my mortgage business. I entered the business seven years ago this month, just before the insanity began. At that time, rates were starting to fall from the mid-seven percent range, and innovative prime (I never got real deep into sub-prime) loan programs were popping out of the woodwork. I began to carve out my niche by helping first time home-buyers who were just outside-of-the-box fit into one of these new programs. The programs became increasingly aggressive and greater in number. I spent the next six years searching out these programs and marketing them to consumers. When the sub-prime market collapsed, many other innovative programs changed or disappeared altogether. My Cheese Moved! What I didn't realize, is by focusing so intently on that niche, I had stopped growing. If I had kept my head up, kept looking for new opportunities, and kept moving forward, I could have anticipated the changes and been ready to capitalize when it all went down.

The book takes us through principles for recognizing change, adapting, and getting the most out of it in a fun and entertaining manner. When I finished the book, I found myself motivated, ready to go and implement the principles set forth in the book.

So I got home, got a coach, wrote a life plan, a business vision, and am working on a business plan. I now have an accountability partner that will help make sure I stay on track. I won't get bogged down in the daily grind, I'll keep focused on the bigger picture, and my BIG WHY. . . the reason I go through all of this, namely, the two guys I mentioned in the first paragraph.

Hurray! FHA downpayment assistance programs are here to stay!

Mark Miller - Flagstar Bank — Fri, 07 Mar 2008 14:57:37 -0600

The United States District Court of Columbia issued a decison on Wednesday confirming that Downpayment Assistance foundations such as Ameridream, Genesis, and Nehemiah may continue operations indefinitely.

If you are interested, read the official ruling here.

This is really good news. An adverse decision could have further reduced active buyers in the market. This ruling, however, in conjunction with the recently raised loan limits will continue to help the housing market recover, allowing first time homebuyers, who haven't been able to save a downpayment, or folks relocating, who didn't walk away with much from their other home, to purchase instead of rent.

Once again this is good stuff. Spread the word. Any questions, get in touch with me.

Mark J. Miller
Senior Loan Officer
Office:  734.913.0744 x225
Cell:     734.644.1201
Fax:     888.268.2216
http://www.markjmillerloans.com/

New FHA Limits

Mark Miller - Flagstar Bank — Thu, 06 Mar 2008 14:14:18 -0600

HUD to the Rescue!

Well it's official: HUD has raised its limits to help the housing market. This means that more buyers will be swimming around in the pool to buy bigger homes. The new limit in Washtenaw county is $345,000. Wayne, Oakland, Livingston, Lenawee, and Monroe are $297,500. Jackson is $271,050, which is the national floor.

New Conforming limits were also released, unfortunately, Michigan's limits were left unchanged at $417,000.

Here's the link to do your own search.

FHA is a'changin'

Mark Miller - Flagstar Bank — Sat, 01 Mar 2008 22:51:46 -0600

The Federal Housing Administration was created in 1934 as part of FDR's "New Deal" in an effort to the lift the country out of the Great Depression. At the time, the U.S. was in the midst of a credit crunch and a housing crisis. Mortgages were very difficult to qualify for, were limited to 50% of the home's value -- and were Balloon loans due in 3 -5 years. FHA changed all that by insuring mortgages, thereby making the Dream of Homeownership ATTAINABLE to most Americans.

Up until a couple years ago, the program was oftentimes relegated to an option of last resort because of extra regulation, excessive paperwork, cumbersome appraisals, and drawn-out processing and underwriting.

Much of that changed in December of 2005 when the program was revamped, the Automated Underwriting System was improved, and the appraisal standards were relaxed, making the loan much more Realtor, Borrower and Lender friendly.

FHA continued to gain popularity through the use of Seller-Funded Non-Profit Down-payment Assistance Foundations such as Nehemiah, Ameridream, and The Genesis Foundation. These organizations take donations primarily from property sellers and give grants for down paymentsto homebuyers. Through this process, over half a million families have been able to purchase a home when it otherwise would have been impossible.

While a boon for the lenders, homebuyers and realtors, FHA moved to quell the downpayment assistance (DPA) frenzy in the spring of 2007. The DPA industry sued, and an injunction was granted, allowing them to continue business as usual. A final ruling was expected by February 29, 2008, but no news yet. I've been keeping an eye out for updates, and will post here when I get the news.

Last year, as Throngs of Sub-Prime Lenders went Belly Up, Mortgage Loan Officers once again turned to Government Loans to help home buyers who didn't fit squarely into conforming loan guidelines.

FHA was a decent substitute because it:

Had no minimum credit score
Wasn't credit score driven for either underwriting or rate,
Has a low minimum down payment (3%) that could come from a variety of sources
Has flexible debt-to-income ratios
Can be manually underwritten -- one of the few loan programs that gives underwriters a large amount of discretion in evaluating borrower's likelihood to repay the loan.

Because of the enormous increase FHA loan volume (Flagstar's FHA volume has increased over 1000% in the past 12 months!) from credit-challenged borrowers, many lenders have instituted minimum credit scores and risk based pricing. One lender, for example, has a 550 minimum credit score to do an FHA loan, and will charge a slightly higher rate for a score under 600. This wasn't the case in the past, when with strong compensating factors, an enterprising loan officer could legitimately justify to an underwriter why a borrower with a sub-500 credit score should be approved.

The government has been quick to roll out modifications of its program as consumer needs arise:

· Summer 2005, HUD announced the FHA 203(h) program for disaster victims in presidentially declared disaster areas. Waives the 3% downpayment requirement

· Fall 2007, FHA Secure is announced as solution for borrowers experiencing difficulty because of payment shock from a resetting adjustable rate mortgage.

· Special Incentives for FHA financing on HUD-Owned properties. $100 Down, $2500 towards closing costs, $500 bonus for Realtors

· FHA loan limits are being increased as of March 15, 2008. NAR's estimate for Washtenaw is $344,750, for Wayne is 297, 500.

Between the expanded loan limits, flexible down-payment sources, and newly developed programs, the FHA loan programs have in the past, and will continue to be a major stabilizing force in our housing market. They products continue to evolve with the needs of our country.

For more information on this invaluable program, please contact me.

Mark J. Miller
Senior Loan Officer
Mobile: 734.644.1201
Fax: 866.268.2216
www.markjmillerloans.com

True Zero Down Loans Still Exist! (even in declining markets)

Mark Miller - Flagstar Bank — Thu, 28 Feb 2008 15:44:56 -0600

Over the past year we've been through a mortgage meltdown, a credit crisis, and a housing slump. This "perfect storm" has shook the mortgage industry to its core. Most lenders have dramatically tightened their guidelines, including the two behemoths, Fannie Mae and Freddie Mac, which are requiring a 5% down-payment in markets deemed "declining". Even FHA is considering eliminating the ability of home-buyers to utilize the seller-funded non-profit down-payment assistance foundations. (Ameridream, Nehemiah, Genesis, etc.) We'll have an answer on that issue tomorrow.

So what are young folks to do? Spend years renting while they struggle to save? Not necessarily. . .

Perhaps the most under-utilized loan around is the USDA Guaranteed Rural Housing Program. These are some of its features:

No Down-payment
No Mortgage Insurance
30 Year Fixed Rate
Partner with other Funding Sources
No Loan Limit
Fees & Repairs may be Financed
Unlimited Gifts or Seller Contributions
No Reserves Required

Sounds great, right? Most people think it sounds wonderful, but they assume that properties have to be way out in the "boonies" to be eligible. NOT SO! In the Ann Arbor/Ypsilanti area, if you're looking South of Textile, West of Zeeb, or North of N. Territorial, your're eligible! Below is a local map. The shaded area is not eligible, but everywhere else is, including Saline, Milan, Dexter, Chelsea and Pinckney. Here is the link so you can do your own search: Search Tool

There are a couple things to be aware of:

They can't make a ton of money: The limit for a family of 4 in the Ann Arbor area is $85,700.
The House has to be in decent, not perfect, but decent shape. (Repairs can be financed, however)
Since a government agency is involved, there is a little more red tape (not much), so allow 30 - 45 days from contract to close.

This is a wonderful program that just doesn't get the same kind of publicity that FHA or other programs get. For more information visit http://eligibility.sc.egov.usda.gov/eligibility/eligibilityAction.do or contact me.

Mark J. Miller

Cell: 734-644-1201 mark.miller@flagstar.com

http://www.markjmillerloans.com/