Here in Southern Oregon, super jumbo mortgages are not commonly seen. I found this an interesting read, getting a glimpse in to the motivation these homeowners had in taking out their multi-million dollar mortgages. Used to see this a lot more in my Southern California days...

This is some great information put together by Debi Boucher, Woodland Park photographer about the differences between a cold and H1N1. Great info!

I’m thanking God it is Friday. This week has so drained my energy. I’m looking forward to it being revitalized by family, friends and church this weekend. I will not be taking any business related calls this weekend, because I desperately need to recharge. Have you ever felt like that?

A “funny” thing happened this week, though. In the heat of trying to prod government and major bank employees along to get a first time home buyer’s transaction closed before their extended closing date passed us by, I inadvertently addressed a fiery e-mail to the previous CEO of Carteret Mortgage, one of our nation's largest mortgage brokerage until they closed down with the rapid disintegration of the mortgage industry. I can’t tell you how this “divine intervention” “coincidence” - whatever you wish to label this experience – did to help take my focus off an imploding file, taking me out of battle mode for a few moments so I could contemplate how the myriad of changes we’ve been facing in the mortgage industry have effected this gentleman, Mr. Eric Weinstein (not Everlyn Williams, whom the e-mail was intended for! :->).

The dialog between Eric Weinstein and I went back and forth a bit, but here is an article by Eric Weinstein, formerly CEO of Carteret Mortgage, that I found soothing in this crazy week:

“How to get rich in this market” by Eric Weinstein

“I must say, as the former owner of one of the largest mortgage brokers in the country, I have a new found respect for all the crap my loan officers must have gone through when I was at the top making policy at Carteret Mortgage. Literally, four of my last 5 borrowers in the last two weeks did not qualify where less than a year ago, they were golden. I never had these problems when I was taking loan apps fifteen years ago, typing the 1003 on my trusty Smith-Corona and using some sort of “special machine” to run my credit reports. You old timers, like me, will remember the days before LP, before anyone had an LOS that merged the liabilities into the second page and when basically anyone breathing qualified for a loan.

So here I am, a time traveler thrown back fifteen years, to when I was a loan officer just starting out in the business. Back then, all we had was agency and government loans, just like to day. At least we had MI back then. Yes, technology has made inputting the loan faster, but now we have to worry about appraisal reviews and ever changing guidelines.

What I am saying is…”It’s always something.” The market is tough now, but hey, old timers like us have been through stuff like this before. The market is bad, then it’s good, then it’s bad again Underwriting is hard, then it’s easy, then it’s hard again.  Life sucks, then you are on top of the world and then it sucks again. So what is the secret to being rich in this crazy market?

I love the bumper sticker “He, who dies with the most toys … is STILL DEAD.” The best way to get rich in this market is to count your blessings, Realize you still have your health, your family and you are still breathing on this earth. Life is the greatest gift and if you are reading this, there is a good chance you are not dead yet. Rejoice at just being alive and the rest is just the price you pay for the privilege. Right now, you are the richest person at the cemetery. So, just say a little” thank you”, and get back to work.”

Eric – thank you! I’m counting my blessings…and getting rich!

See you out there!

We're seeing a lot of accepted offers way over the listed price on bank owned foreclosure homes in our local markets, too. I haven't seen any low appraisals, although we've been seeing lots of repairs called out. Lisa brings to light an issue I hadn't considered. Thanks for the food for thought, Lisa!

Gary Woltal has highlighted the new Good Faith Estimate and its 2010 proposed changes very well. Hopefully, this will be the final form that is eventually released in January, as many revisions have taken place. Thanks, Gary!

2008 and 2009 have been phenomenal funding times for FHA loan financing for buyers purchasing real estate. This is because FHA guidelines are broader, making this financing tool more suited to today’s homebuyers’ needs. FHA guidelines allow the buyer to receive gift funds for their down payment/closing costs, which is what many first time home buyers are doing these days.

Prior to FHA financing’s comeback, conventional loans were the tool of choice for first time home buyers because they could choose “piggyback financing” – two loans, holding the amount borrowed on the 1^st mortgage to 80% or less, financing the rest in the 2^nd mortgage, thereby eliminating the need to obtain private mortgage insurance which until the past few years was not tax deductible. Automated underwriting made for easy processing of these loans, limiting documentation requirements and making for faster closings.

Now, proposals are moving forward to increase the down payment requirements on FHA financing to at least 5% down. I’ve received word that Fannie Mae and Freddie Mac are reviving 3% down on certain programs for home buyers with credit scores of 680+, because they have a private mortgage insurance carrier that will agree to insure these loans. These programs are priced higher than FHA financing, making it an unlikely substitute if the down payment requirements are raised on FHA loans.

In 2010, the tax deduction for private mortgage insurance is set to sunset. I haven’t heard about any proposal to extend that tax deduction. Guess it’s time to start another letter writing campaign to my elected officials on THAT issue.

Welcome to my world where the new is old and the old is new…it’s like watching professional ping-pong.

See you out there!

There’s another home on our street that turned over recently. This homeowner relocated to another state to take a job. Having purchased at a high point in the market, they rented the home out, after attempting to sell it to no avail. Three sets of tenants later in a relatively short period of time of about 2 years, they put the home on the market. I’m guessing it was a short sale, with the owner having purchased at a peak AND sunk quite a bit of money in to the home to renovate it and fix some quirky floor plan issues making this home more easily marketable for the future... a future that came along much sooner than the homeowner anticipated. 

Short sales are not looked upon favorably in our market, by the prospective buyers or by the Realtors. Showings are lower than they are on bank owned foreclosure homes or privately held “market rate” homes. With good reason, based on the lack of response and ineptitude encountered with many mortgage holders. Admittedly, some of them are getting better. Some are still floundering with the excessive, escalating volume of transactions these mortgage companies need to review, transactions being set up and processed by inexperienced under-trained staff that have been thrown in to sink or swim at these mortgage companies. There are some bargain hunters willing to give purchasing a short sale home a try, or purchasing a bank owned foreclosure home able to see its potential through the damage the property may have and the repairs/renovation it may need. Who can blame them for wanting to take advantage of extraordinarily low priced homes while they can take advantage of the $8,000 first time home buyer tax credit AND low mortgage interest rates? Or, if they are investors, pick up several homes for their portfolio that will cashflow and meet their return on investment goals?

Over time, multiple buyers came along, some tried to negotiate an accepted contract to be approved by the mortgage companies, and then there would be a price reduction and further wait for another buyer willing to attempt the cycle again. Finally, a diligent (lucky?) buyer came along, worked out a deal, got the mortgage company to approve it, and closed escrow on this home. Hallelujah, after a year the vacant home is filled! And the home DID NOT go through foreclosure.

Thank you persistent seller for pursuing this long road to avoid letting the home go back to the bank. Thank you dedicated real estate brokers who hung in there to successfully get this home sold. Thank you diligent buyer who lives in this home - we're thrilled to have good neighbors again.

People are successfully refinancing there homes under the Home Affordable Refinance program. People are successfully modifying their loans under the Home Affordable Modification Program. Even more people are now successfully refinancing or modifying their existing home loans under the Home Affordable Programs since the limit was increased to 125% of their home’s current market value. People are successfully selling their homes for less than what is owed on them when they can no longer ride this market out. Kudos to every one of these people for traveling these challenging paths to avoid foreclosure.

Thanks, Neighbor, for your diligence in getting your home sold…for playing your part in stemming the tide of foreclosures we’re seeing in our local real estate market. The rest of us here really appreciate it!!!!

See you out there!

There are some great Realtors here in Southern Oregon, dedicated to their profession and their clients. One of them, our 2010 Rogue Valley Association of Realtors President, Krista Bolf, knows where I live and lets me know what sales are happening in the neighborhoods where we own property.  Yesterday, Krista Bolf of Coldwell Banker ProWest Ashland spotted a new listing on our street. This isn’t the first “don’t shoot the messenger” message we’ve received from Krista Bolf, and with the way the local real estate market has been very likely won’t be the last.

There are a lot of ways to deal with financial distress. I’ve listed several of those that pertain to the housing/real estate/ mortgage distress below. Then, there are those that just irk me, like the strategic foreclosure or the high cost loan modification companies.

As of October, there was another Trustee Sale creating a bank owned foreclosure home on our street. There are about to be two bank owned foreclosure homes on the street where we have a rental, too. A sign of the times, hopefully a tide that will be stemmed soon with all of the housing stimulus being poured out. If I’m going to have to foot the bill for these programs for the rest of my life and probably those of my children, I’d like to see this blood-letting of our assets end soon.

The most recent bank owned foreclosure home on our street is a home the owners had for almost 20 years. At some point, maybe from the beginning, this was an investment property for the owners. They wouldn’t have been eligible for the Home Affordable Modification Program through Bank of America/Countrywide/Fannie Mae/Freddie Mac because they won’t modify notes on this program for Investment Property. They paid $85,000 for the home that went back to the bank. But, it didn’t go back to the bank to be foreclosed on for that amount or less. It went back for almost $230,000 owed to Bank of America/Countrywide. So, that tells me the owner used this home as an A.T.M., borrowing against it and borrowing against it until the rents couldn’t sustain the Bank of America/Countrywide mortgage payments, at which time they defaulted on their Bank of America/Countrywide mortgage creating a new foreclosure in our neighborhood. I don’t know about you, but I certainly don’t appreciate the ramifications of what may have been this homeowner’s decisions! No, I don’t know first hand what circumstances led to the eventual loss of our neighbor’s house through foreclosure or their reasons for refinancing; maybe there were health issues that led to outrageous medical bills, or a job/income loss that put them in survival mode - I’d rather think this than that they sucked all the equity dry and walked leaving the rest of us to pay the price. Yes, I am making some assumptions based on case histories I’ve come across repeatedly since the real estate/mortgage industry began the tumble from unsustainable peaks.

So now, Bank of America/Countrywide/Fannie Mae/Freddie Mac has listed the home for sale at a “bargain rate”, something that is done prevalently by banks when selling their foreclosure inventory. Throw the home on the market at a low price, sell quickly, drag the values in the neighborhood down for the rest of us – over and over again if there are multiple bank owned foreclosure homes in the neighborhood, which we are finding happens frequently. This home in our neighborhood is listed for sale for a little over $150,000. We paid $205,000 for our house in 2004. Yes, this REO home is less desirable in condition, lot size and location, but we are similar in square footage and age. We don’t have a lot of turnover of homes in our neighborhood, so this puppy will be setting the stage on values for a while.

So, thanks Neighbor for the choices you made leading to your home going back to the bank (or, forgive me for making false assumptions), and thanks Bank of America/Countrywide/Fannie Mae/Freddie Mac for putting this foreclosure home on the market at this below market rate – NOT! These banks are reminding me of the Robin Hood principle - stealing from the “rich” to give to the “poor”, and I’m getting a little tired of being stolen from! It’s no wonder we’re seeing the level of strategic defaults we’re seeing now. Is this the objective/goal you had in mind Bank of America/Countrywide/Fannie Mae/Freddie Mac? You contributed to it!!!!

There ARE other ways to handle distressful financial circumstances in many cases. Exploring all alternatives, like Home Affordable Refinance or Home Affordable Modification Programs which will now let you refinance up to 125% of your primary home’s value to help you lower your payments and keep you in your home using any lender that offers the programs, not just the one you are already with who you may or may not want to stick with. If you’ve tried one or both of those two Home Affordable options, but you don’t qualify, you may want to get legal/tax guidance for the other alternatives. If you haven’t tried the Home Affordable programs because of the barrage of negative media attention on unsuccessful applicants, TURN YOUR TV/RADIO/ MONITOR off and give it a try! If you’ve tried the Home Affordable route, but haven’t been able to get a credible response/action from your lender, get to a HUD approved housing counselor in your area to help you work through the process – THEY will get the attention of your mortgage holder. Exhaust this alternative, because the next options – short sale/ deed in lieu of foreclosure/ foreclosure / bankruptcy – will have longer term, costlier affects on your credit and your pocketbook. If a Home Ownership Preservation Event (H.O.P.E.) is being held in your area, and you need help on your primary residence, GO TO IT! Make sure you get the proper professional guidance from a knowledgeable reputable source, as bad advice and scams are rampant out there. Chances are anyone who wants to charge you a significant upfront fee for loan modification is operating illegally – they are in California and Oregon, anyway.

See you out there!

Having been in the mortgage industry for so long, having seen a great many changes since 1983, recent changes seem different from earlier changes in one big way. The period between 2007 and 2009 doesn’t really seem like a long period of time in the big picture, but these changes are making for some long days in my mortgage industry world. Where many of the changes in the past were market driven, today’s changes are “putting fires out” driven. And it seems to me, those changes are being made without the necessary foresight and investigation required to have these changes be viable solutions to the problems they are meant to address.  Take these two, for example:

Home Valuation Code of Conduct (HVCC):

Before this change went in to effect, a loan originator could choose an experienced, qualified, local appraiser to be hired to do the appraisal inspection/report for their refinance or purchase transaction. Limited analysis of rapidly defaulting home loans brought to light that there were cases of undue pressure on appraisers that were playing a big part in the appraisers providing over-inflated values. The solution was to not allow loan originators to speak to appraisers and limit what other parties to a transaction may say to an appraiser that must be hired anonymously through an appraisal management company. Of course, the appraisal management company wants to be paid, so they first increased appraisal fees, then secondly took a piece of the appraiser’s compensation to accomplish this. The appraisers the appraisal management companies hire have to be willing to accept the lower compensation for the same work, limiting the available pool the appraisal management companies draw from, and often the appraisal management companies hire appraisers for jobs that are not from the area the subject property is located in and/or appraisers that have less experience than that of the appraiser an originator may have chosen to hire for the job before. The latest report referenced by TBWS on a comparison between 2^nd quarter 2009 when HVCC went in to effect, comparing the 3^rd quarter 2009 results to 3^rd quarter 2008 results before HVCC was in effect, and guess what? Cases of appraisal fraud, including over-inflated values, are UP 46% since HVCC was instituted.

Real Estate Settlement Procedures Act (RESPA):

There have been several proposed changes to RESPA to help make the Good Faith Estimate and Truth-in-Lending disclosures with their respective information complete, clear and concise. Limited analysis of the homeowners defaulting on their home loans brought to light that many of those homeowners didn’t fully understand the loan program they used to buy/refinance their home. It also brought to light that a limited number of loan originators were “churning” loans and being compensated through yield spread premiums on those loans that bank employees were not required to disclose to their borrowers. The objective is to help the home loan applicant better understand the loan product they have chosen and the loan products available to them to use as the tool for their refinance or home purchase. Further proposed changes currently in the comment stages are proposing that yield spread premiums disclosed by mortgage brokers but not by the rest of the mortgage originators be eliminated, not just disclosed because the average homeowner isn’t savvy enough to figure out what they are. The results? The disclosure forms are longer, more confusing for first time homebuyers, and if the latest change proposed by R1366 is approved, will eliminate yield spread premium and fix the compensation of loan originators, so that those seeking home loans will HAVE to pay points to get their loans (although 44% of borrowers chose NOT to) unable to scale their interest rates up and down to offset charges for risk factors associated with their individual circumstances and/or get the lowest annual percentage rate for their individual plans/goals/objectives.

The difference from earlier changes and the common denominator I see in today’s changes? They HURT the consumer!!!! They are NOT helping anyone other than the factors pressing for changes that will make them money and/or eliminate their competition. They will chase what is left of the quality appraisers, loan originators, and real estate brokers out of the business. The rules don’t need to be dramatically changed like this…the original ones just needed to be enforced! Greed, fraud, poor judgment are still a part of our world – how about we focus on enforcing existing regulations/ laws to address these issues since this human element can’t be removed?

You CAN do something to change the changes. Let your elected officials know your experience with HVCC if your transaction(s) fell apart because of it. It isn’t too late, because a bill is moving forward requesting a moratorium on HVCC.  Let your elected officials know if you don’t want to HAVE to pay thousand of dollars more for an interest rate that is SET, and you believe you are intelligent enough to understand – or have confidence in the support you can get to help interpret –your disclosure forms, the forms the newest MDIA regulations give you 6 business days to receive and review before an appraisal may be ordered. If you attend HUD approved homebuyer education programs, you are taught how to figure these out.

We’ve come a long ways these past 2 ½ years…but I think we’ve taken some wrong turns at some Y’s along the way. I think it’s time We The People take some initiative and steer our own vehicle. Let your voice be heard – it’s your constitutional right!

I have a suggestion. How about we get back to basics – buyer beware, read before you sign, get reputable professional guidance if you don’t understand it, “buy local” through recommended companies/ representatives.

See you out there!