Dave's Blog

Understanding the Internet Buyer (NAR Convention Speech)

Wed, 18 Nov 2009 09:51:09 -0600

Spencer's presentation below about the trends in internet home buying had a couple of real eye-openers for me. (You can get the whole presentation to share with your office as either a ppt or pdf by clicking here.)

These buyers use much less time of your agents (visit half as many homes and buy quicker)
They visit brokerage and agent websites nearly as often as they do realtor.com and they are looking for broker representation while surfing
iPhone real estate apps are going to be VERY important (AT&T coming to Central OR in a matter of weeks, click here.)

Thanks Spencer!

Via Spencer Rascoff (Zillow):

Here is my presentation from the NAR Convention in San Diego, "Understanding the Internet Buyer". If you ever want me or someone from Zillow to present to agents in your office (in person or via webinar), please let me know.

Here's the video. It seems to crash the Firefox browser when I embed the video, so you'll have to watch it over on ustream.

Understanding the Internet Buyer

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These days - more than ever - experience counts!

541.318.0888

Rates Drop and Buffett Speaks up on Bond Buying

Mon, 16 Nov 2009 11:45:44 -0600

Rates are even better this week than last! We are locking conforming loans at 4.625% for 30-year fixed for the price of an origination and normal closing costs. Why the improvement? Mortgage Backed Securities (MBS) continue to ride sky high with values very close to their 2-year high-water mark set 6 weeks ago. There are more investors wishing to buy MBS as an excellent investment, now safely returning twice what CDs and other fixed income instruments are returning. The volumes available (supply) of mortgage bonds dipped lower in the last 2 weeks as home purchases and refinances slowed, causing demand to exceed supply.

All of this is possible because the inflation monster is secured tightly in its closet for apparently many more months to come, leaving supply and demand to rule the day. Two very critical factors to watch for in supply and demand are Fed purchases of MBS and foreign investors’ appetite for US debt instruments. The Fed purchase program will taper off through an end, slated for March 30, 2010. See the chart below for Fed purchase history. The other most significant influence on gov’t issued debt (MBS compete directly with T Bills for investor demand) is the level of interest from overseas buyers.

Much has been said about “When will China stop buying our debt?” The answer was clarified to me Friday by the Oracle of Omaha, Warren Buffett in a Charlie Rose interview. If you didn't see it, watch for it on Bloomberg replays or see excerpts of it by clicking here. He explained many things very clearly including why China buys US debt, even after they threaten to walk away. It is all about the US-China Trade deficit which is running in excess of $400 Billion annually. Those are real, US dollars being exported that have to work their way back into the US to have any value. The most logical place for that until the trade balance shifts is into Treasury securities, hence the continued demand. Now the biggest problem will come if we deficit-spend our way into a need for even more bond investors than this cycle can support. Current projections of deficit spending over then next 7 years would cause irreparable damage to this delicate balance. Mr. Geithner will have to apply a hand of restraint in the current spending plans. Watch for this to become a much more important topic in the coming year.

Last week I pointed out that the trend of Central Oregon home unit values and median prices were moving in different directions. (Unit volumes have recovered in Oct ‘09 to be ~90% of Oct ’07 transactions, whereas median prices have continued to fall, now at ~50% of Oct ’07 prices.) I asked the question there about price per square foot because median prices are a combination of two very different influences, changes in the price per square foot (true value indicator) and a shift in the “mix” of higher and lower priced homes. Well one of my readers got back to me with some good-news facts. Even though the median price has fallen by 50%, the price per square foot in the same time has dropped less than 30%. This shows what we have known from the activity: the median price drop is significantly a reflection of the shift in mix to starter homes selling more than higher-end homes. Time will tell, but this should give some hope for a recovery in the median prices as mix shifts again to more normal. Central Oregon is still the best place in the US to live. If you haven’t seen it already – make sure you check out the new Visit Bend promotional video, click here.

The coming week has economic reports of interest. The retail sales reports will be out today and PPI/CPI inflation data on T/W. The following week’s auctions of T-Bills will be interesting when announced on Thursday. If you are tired of the impact HVCC has had on your deals, click here for a blog of recent experience. Check out the job interview skills video toward the bottom of this email and make it a great week!

Thank You! I appreciate your support ... lots of changes in the industry and many have not survived - Thanks to you keeping us top of mind - Signet has continued to thrive and celebrated its 6th year in business this summer! As I am 100% referral based - I depend on you to keep growing! We have added exceptional professionals to handle the increase – don’t hesitate to call.

These days - more than ever - experience counts!

541.318.0888

Rates, Housing, Tax Credits, Unemployment, FED announcements, Treasury Auctions, Oh My!

Mon, 16 Nov 2009 11:42:09 -0600

Originially sent out Monday 11/9/09 - for realtime receipt of our blog - email dave@signetmortgage.com

Rates, Housing, Tax Credits, Unemployment, FED announcements, Treasury Auctions, Oh My! We had a full week with many different topics in play. To cut to the chase: Signet Mortgage lending rates remain for 30-yr fixed at 4.75% with an origination and normal closing costs for conforming amounts and qualified borrowers. We are locking and closing loans. Come see us

THE Fed held their FOMC meetings and announced on Wednesday that they are not raising interest rates. In fact, based on the state of the economy (all rosy stories aside) the FOMC statement that we should expect “exceptionally low levels of the federal funds rate for an extended period “ (full statement: click here) is feeling like it may be in place for more than just a number of months. The Fed’s primary objectives are fostering growth and avoiding inflation. If anything, we continue to see if anything, deflationary signs. And unemployment is a big part of that sign. We won’t see the Fed raising interest rates until they start seeing unemployment turn.

The headliner unemployment number is now officially 10.2%, highest since 1983 when I was graduating from business school. Remember just over a year ago when still at under 6% unemployment and Clayton Christensen made a statement that unemployment would rise over 10% and we were in awe because we respect his opinion so well? Now the real news is not the headliner. The real news is that with adding in the underemployed the number is now at 17.5%, and growing. This is why the fed expects that “inflation will remain subdued for some time .“ That’s not to say we won’t see interest rates rising, just delayed and dependent on supply and demand rather than inflation.

The big news that raised Alerts! and Tweets from Signet Mortgage this week was the passage and enactment of the “Worker, Homeownership, and Business Assistance Act of 2009”. (Click here for text of the Act.) While this and its expanded tax credit got all the attention for its impact on the housing market, the passage in the House Saturday night, of the health care bill will ultimately have a broader impact on the long-term housing market and values. But for now we have an expanded and extended tax credit. We’ve told you about the main points:

$8,000 First Time Home Buyers credit continues

New $6,500 for existing “Move-Up” homebuyers

- Same home for 5 yrs of past 8-yr period

Contracts (EMA) signed by 4/30/10

Closings before 7/1/10

Home purchase price of $800,000 or less

Income limits expanded

- Old: $75,000 single, $150,000 Married

- New: $125,000 single, $225,000 Married

Tax Return filing will require HUD-1 be Attached

The rest of the story is timing how these items become effective. The good news is that the “Move-Up” credit is effective for purchases closed from last Friday Nov. 6^th and forward. This is also true for the $800,000 limit and for the new expanded income limits. The surprise is that the tax return filing requirement for a signed HUD-1 attachment is retroactive to all credit-claiming sales for 2009. This isn’t bad, just expect a rush of requests at the title companies come tax time.

The impact of the credit has been debated, but there is plenty of evidence (increased volumes and dropping median prices) that it has had a big effect recently. The question is, will the expanding to move-up buyers have a broadening effect? The congress hopes so. Some local evidence of the impact is seen in a report from Pat Huber, CPA and Broker at Taft Dire here in Bend. She points out that unit volumes dropped to a low point a year ago and have climbed back to 91% of 2006 volumes (comparing October stats.) At the same time, median prices for Oct 2009 compared to October 2006 are only at 52%. The recent, increased volumes have largely been at lower prices. If any of you are numbers-fans, I’d love to see the same measures using price per square foot. I know it has dropped, but I am betting not to a 52% level, supporting my supposition that the FTHB impact that is driving some of the drop in median prices. If that is the case, we should see some stabilizing and perhaps recovery in the medians. The interesting story will be how we come out of the credit-supported buying in the late-spring, early-summer. Don’t expect further extensions.

These days - more than ever - experience counts!

541.318.0888

At the NAR. HVCC Problems? Not according to the Government.

Sat, 14 Nov 2009 15:41:50 -0600

Here is a great rant, and well founded. We've seen a lack of accountability caused by the HVCC. Two appraisals performed within days of each other had vastly divergent answers (of course, the appraisal done for a potential refi by the contractor/seller's bank was much higher than the one done for the borrower's bank in this purchase transaction.) So we rebutted the comps used for the lower appraisal (some as much as 12 months old and not very nearby.) The AMC sent the rebuttal to the appraiser along with some suggested additional (and more appropriate) comps. The Appraiser responded with "additional comps considered and with adjustments continue to support our previous conclusion."

No kidding - what were they going to say. "Oh you are right, we are incompetent and missed this entirely."?? No, they will always justify their actions (incompetent as they appear) and because we can't direct our business away from them, they are not accountable. Even competent appraisers I have spoken with recognize that this is one of the failings of this NY State-imposed government protection of the poor, illiterate american citizens who can't survive without our stepping in.

The government regulation pendulum has only begun to swing to its fully-imposing, over-regulated stance and we can already see the ill effects. The full effect will be devastating to our economy. -Dave

Via Gene Wunderlich - Realtor®, Government Affairs Director (Southwest Riverside County Association of Realtors):

One of the seminars I attended today at NAR was entitled 'Managing the Risks and Opportunities of the New Home Valuation Code of Conduct (HVCC)."

Let me say at the outset, I sat through the whole friggin thing and didn't note any opportunities - unless you count aggravation as an opportunity. No shortage of risks, however.

NAR did a great job staging this - they had a panel in place that included spokesholes from FHFA, FHA, Fannie Mae, Freddie Mac and an AMC. Oh, and they had two Realtors sitting in for balance. In my humble opinion, if I had a load of the bullshit they were peddling today, I would have the healthiest, greenest lawn in Southern California.

Alfred Pollard, General Counsel for the Federal Housing Finance Agency; Jacqueline Doty, Directory of Collateral Policy for Freddie Mac; and Mark Johnson, COO for LSI (and Appraisal Management Co), started the process with brief statements on why the program was started (to combat fraud) and how well it's working. As Mr. Pollard stated - 'we have experience a systemic event for the financial markets, primary and secondary lenders, Realtors, institutional lenders and appraisers - all of those industries are on the table as we determine what comes next.'

It was interesting to note that the one entity that he left out, the one he happens to work for, wasn't included as being on the table - THE GOVERNMENT. The one institution central to the whole fiasco is the only one not up for evaluation and found wanting. In fact, these sanctimonious bastards are now sitting in judgement of the rest of us and determining how they can keep us from running amok again. Ain't that special.

Our Realtor panelists, Steve White, owner of two large Keller-Williams offices in LA; and Penny Triplet, a Realtor and appraiser from Ohio, stated the litany of complaints that you are all familiar with. Delays, incompetence, bad appraisers, out of area appraisers, higher costs to customers, lost transactions, lack of portability - you name it, they brought it up.

The government people claimed to be listening but they were just dancing. Time and again they quoted passages from the 6 page HVCC document - well this is how it's supposed to work; well, this is what it says; well that's another of those myths; well this is how you're supposed to work through that. Basically they acknowledged that 'there might be a few bad actors in the group but this HVCC has solved a lot of problems and is a wonderful thing.'

Oh, and if you thought it was scheduled to expire in June of 2010 - think again, It's in place until next November and there ain't nothing you or (NAR President) Charles MacMillan or anybody else can do about it. Your opportunity is to learn how to work with it because it's here to stay. Even after the current HVCC expires, some form of the bureaucracy that has been set up to administer it will continue because, like any government program, once born it never dies.

As if the moderator knew the Q & A might get testy, she decided that rather than take questions from the floor, she would just take questions submitted in writing. That lasted about 15 minutes until she could no longer ignore the line of Realtors standing quietly at the microphones waiting to ask questions.

Still no straight answers were forthcoming. Realtors were advised to report bad appraisers - that is if you can figure out who they work for or if the AMC or the lender cares enough to return your call (after 18 months, the office for reporting bad appraisers still hasn't quite been set up but it's coming soon). Realtors are allowed to talk to appraisers and even give them comps, of course provided the appraiser even bothers to call you or come out to your city or doesn't report you for applying undue influence by giving them accurate comps. If you get a bad appraiser you can request a do-over, of course it will be done by the same guy whom is now pissed off and never mind that the delay might cost you the deal. If it's so bad your buyer switches to another lender of course the appraisal should be portable (like you'd want to port that crap) unless the new lender doesn't want to accept it or it's from an appraiser that's not accredited by their AMC, in which case your client will get to buy a new one and hope it's better than the old one. You've got an appraiser from 200 miles away? Or even from another state? Jeez, that's not supposed to happen because the HVCC says it's not so it can't be. That's just anecdotal information. The Freddie Mac rep said complaints to her office are waaaay down since HVCC. Complaints from appraisers that is. Turns out they don't take complaints from Realtors unfortunately.

One Realtor summed it up perfectly - 'The government appears to think the problem in under control. Realtors think the problem is out of control. How do we get the two sides together?

If todays panel is any indication, we don't. Hang on kiddies - it's gonna get worse before it gets better. We're from the government and we're here to help you.

These days - more than ever - experience counts!

541.318.0888

$6,500 "Move-Up" Credit Explained by the Senator Who Invented It

Thu, 05 Nov 2009 17:14:18 -0600

Obama to sign legislation tomorrow - will extend to June 30, 2010 - First Time Home Buyers still $8,000 and Some Existing Home Buyers Qualify for NEW $6,500 “Move-Up” credit ...

November 5, 2009

Congress acted with urgency today to get the Unemployment and Housing Credit bill out before the Unemployment numbers are reported tomorrow. As part of this, the House accepted the Senate amendments to the bill Extending and Expanding the Home Buyer Tax Credit. As reported in the New York Times, minutes ago, the existing credit will both be extended through the first part of 2010 and expanded to higher income buyers. A new $6,500 credit will be there for some long-time existing homeowners, moving to a new home.

Some cheer, others not so. Is this the right thing to do? As real estate professionals we look forward to the increased activity, but what are the unintended consequences of congressional meddling with the market economy (see Clunkers and see Barney Frank demanding expanded qualification guidelines at FNMA.) How will it be paid for? The projection is that this extension will double to $21 billion the cost of the program.

Here are the important points:

$8,000 First Time Home Buyers credit continues

New $6,500 for existing “Move-Up” homebuyers

- Same home for 5 yrs of past 8-yr period

Contracts (EMA) signed by 4/30/10

Closings before 7/1/10

Home purchase price of $800,000 or less

Income limits expanded

- Old: $75,000 single, $150,000 Married

- New: $125,000 single, $225,000 Married

Tax Return filing will require HUD-1 be Attached

If you are a glutton for punishment, here is the text of the legislation.

As we have told you in the past, the true champion of the Housing Credit Extension is Senator Johnny Isakson (R-GA) a Realtor of 33 years. Here is what he had to say to explain the need for this extension AND expansion now:

“In addition to the $8,000 credit extension for first-time home buyers, a move-up buyer tax credit of $6,500. This is the cornerstone of the substitute before us now. It offers to any previous homeowner who has lived in their home for at least the last 5 years the opportunity to sell that home, invest in a new home, and take up to a $6,500 tax credit. That is going to help us boost what is the problem in the U.S. housing economy today, and that is what is called the move-up market. It is the gentleman who is transferred from Delaware with Hercules to Brunswick, GA, who cannot sell his house in Wilmington and cannot buy a house in Brunswick because the markets are so frozen and the move-up market is dead. Now he has an opportunity to sell that house and have an incentive for its purchase in Delaware and an incentive to come and reinvest that money in Georgia in a house in Brunswick. It will make a measurable difference over the next 7 months in our economy.

“We also raised the means test on income from $75,000 to $150,000, which is in the current credit, to $150,000 and $225,000 in the new bill for both move-up buyers as well as first-time home buyers. Those income thresholds will open the incentive to more Americans and I think will show a measurable increase in the amount of business that takes place.

“In response to the Internal Revenue Service concerns we expressed a few months ago on fraud, we put in every single request they made for fraud to see to it the HUD-1 is attached to tax statements, to see to it there is no fraudulent claim of the money, and to see to it the IRS has every tool they can to prosecute to the fullest anybody who would abuse this credit.”

These days - more than ever - experience counts!

541.318.0888

Tax Credit Extension Proposed Language is Available Here

Tue, 03 Nov 2009 19:30:06 -0600

If you are interested in reading the actual legislative language of the Home Buying Tax Credit Extension bill, it is available by going to this link: http://bit.ly/3UustY This is an amendment (S.AMDT.2724 to H.R.3548) to the Unemployment Extension Bill as offered by Senator Schumer.

As described previously the terms of the expansion to long-time homeowners includes a requirement that they have lived in the same principal residence at least 5 of the last 8 years. The credit will be $6,500 for those individuals.

Limitations are set at income of $150,000 single and $225,000 married (previously reported at $250k)

Maximum home purchase price is set at $800,000 to qualify for the credit. This will be of more interest in California and High priced regions.

Happy reading and remember it is still in amendments to a bill that hasn't passed yet. More legislative "sausage" to be made before we have something to send to the White House for signature.

These days - more than ever - experience counts!

541.318.0888

Good News for Bend Oregon Home Buyers: First Time Home Buyer and Repeat Buyer Tax Credit Close to Final Senate Vote

Tue, 03 Nov 2009 18:56:44 -0600

One of our own realtors here in Bend is keeping up with the legislative efforts on the combined Unemployment Extension and Home Buyer Tax Credit. I am betting on action including a Senate vote and into conference this week.

-Dave

Via Kryste Adams - Central Oregon Real Estate (Fred Real Estate Group *Bend-Redmond-Sunriver-LaPine-Sisters):

Good News for Bend Oregon Home Buyers: First Time Home Buyer and Repeat Buyer Tax Credit Close to Final Senate Vote

Innman News recently announced with in the article, "House leader: Tax credit a go," the following:

The Senate on Monday voted 85-2 to place limits on further debate of HR 3548, a bill extending unemployment benefits that includes an amendment that would allow homebuyers to claim the credit on sales under contract before May 1. The vote to invoke cloture moves HR 3548 closer to a final vote in the Senate as early as today.

Stay tunned for continuing updates as news is released regarding the first time home buyer tax credit and repeat home buyer tax credit.
_____________________________________________________________________________________________

Thanks for reading my Central Oregn Real Estate Blog!

Kryste Adams

______________________________________________________________________________________________

These days - more than ever - experience counts!

541.318.0888

News in Real Estate Abounds and Even Bigger Than...

Mon, 02 Nov 2009 10:52:15 -0600

Plenty of news from last week and I mean even bigger than the Ducks’ smothering of the overmatched Trojans.

In FHA and FNMA home financing news, the High-Balance Conforming Limits that were set to expire this year have been extended through all of 2010. This is big residential real estate news. This legislation means that Central Oregon FHA limits will remain at $417k rather than rolling back to the ~$300k level they were headed for. And for Fannie Mae loans, while the difference in OR between “standard” conforming ($417k) and “high-balance” conforming ($447k) is minimal, the difference in markets that often provide buyers into Central Oregon is very important. California’s high balance limit of $729,750 when combined with a purchase-money second of $350,000 and an approx 20% down payment means that a home with a purchase price of $1,350,000 can be purchased without jumbo financing. FNMA-backed, conforming rates are better than Jumbo residential rates which still don’t enjoy a secondary market.

In economic news, the Q3 GDP numbers were published with a surprisingly high 3.5% growth. This news has to be tempered with a few caveats as cheerleaders call for the official end of the recession. The start of a recession officially waits for 2 consecutive quarters of GDP decline. People often look back to an earlier date to peg the start but it isn’t official until we’ve experienced the 2 consecutive quarters. With this one-quarter upturn, even at the surprising, >1% growth number, we need to remember some of the temporary stimuli that are included in the 3^rd quarter, especially the Clunk of a car incentive program (see here for $24,000 per car taxpayer cost analysis.) Local inquiry resulted in one car dealership indicating that they have had ZERO new car sales in the weeks since Clunker ended. So, while we are happy for some upturn in the GDP, let’s watch for more signs of broad improvement before we relax.

In banking news, the FDIC shutdown 9 more banks on Friday and this was before the CIT restructure announcement. This brings to 141 the number of FDIC takeovers since the beginning of “The Great Recession” and 115 on the year. Incidentally, the 9 banks along with CIT are heavily invested in Commercial Real Estate. Many community banks are the repositories of land, development and commercial lending and we are just still seeing the tip of the iceberg on problems there. Once again this past week Signet stepped in to help a building owner who had been turned down on a loan renewal request with their bank (of 30 years!!) unwilling or unable to extend credit in this region. Please have building owners you know step forward early and get refinanced now rather than waiting for the current note to come due. Signet is ready to take care of their refinancing needs now.

In other legislative news, the Home Buyer Tax Credit Extension gathered momentum and some clarity this past week as we reported on Thursday. However, this is not yet a done deal. The progress last week included a voice vote of confidence in the Senate and an assurance of House passage, but the actual vehicle for passage in both houses needs to be finalized. The likely scenario has the Home Buyer Credit being attached to an unemployment extension bill that has similar levels of support. While the benefits of kick starting the economic engine are likely, the results still raise questions (see Clunker discussion above.) Assuming passage here are the high points again:

$8,000 FTHB credit continues
New $6,500 for existing homebuyers

- Same home for consecutive 5-yr period

Contracts signed by 4/30/10
Closings before 7/1/10
Income limits expanded

- Old: $75,000 single, $150,000 Married
- New: $125,000 single, $250,000 Married

Military personnel extension into 2011
New tax return filing requirements

- Fraud prevention
- HUD-1 attachment to returns

I appreciate all of your support ... lots of changes in the industry and many have not survived - Thanks to you keeping us top of mind - Signet has continued to thrive and celebrated its 6th year in business this summer! As I am 100% referral based - I depend on you to keep growing! We have added exceptional professionals to handle the increase – don’t hesitate to call.

Look for expanded resources on our web site coming soon - an increased emphasis on Commercial Financing, Renovation Lending and Reverse Mortgages.

These days - more than ever - experience counts!

541.318.0888

Home Buyer Credit Extension: Is it the Right Thing To Do?

Thu, 29 Oct 2009 10:56:35 -0500

Senate proposal would extend to July 1, 2010

FTHB Still at $8k and Some Existing Homebuyers May Qualify for New $6,500 Credit

The Senate continues to drive for extension and expansion of the Home Buyer Tax Credit. As reported in the WSJ this morning, the existing credit would both be extended through the first part of 2010 and expanded to higher income buyers, plus a new $6,500 credit would be created for some existing homeowners, moving to a new home.

Before I lay out the details, two words of caution:

Is this the right thing to do? As real estate professionals we look forward to the increased activity, but what are the unintended consequences of congressional meddling with the market economy (see Clunkers and see Barney Frank demanding expanded qualification guidelines at FNMA.)
How will it be paid for? Not yet clear, but the most recent House proposals all included a shift of unspent stimulus dollars to this focused cause. I could support that.

Now back to our usual rah-rah stance. Here are the important points:

$8k FTHB credit continues
New $6,500 for existing homebuyers

- Same home for consecutive 5-yr period

Contracts signed by 4/30/10
Closings before 7/1/10
Income limits expanded

- Old: $75,000 single, $150,000 Married
- New: $125,000 single, $250,000 Married

As we have pointed out before, the making of legislation is a dark and messy affair. Some major hurdles still need to be crossed, but with Senator Harry Reid, House Speaker Pelosi and the White House backing this, it should find its way out the other end of the sausage-making machinery. Watch for it to be attached to the unemployment bill now on the floor for quick passage.

If it does make it through, you will have Senator Johnny Isakson (R-GA) to thank for it. One reason this is getting so much headway in the Senate rather than the House is the effort of Mr. Isakson. He is a former owner of a real estate firm in suburban Atlanta and worked 33 years as a Realtor. His impassioned plea on the Senate floor two weeks ago and his knowledgeable testimony before the Senate Banking, Housing and Urban Affairs Committee last week were strong statements in favor of the credit. He is seen as a very credible source of information on this topic in the Senate.

The most curious part of the whole legislative dance is that this extension seems to have the support of Senate Republicans but may be shot down by House Democrats who “have raised concerns that it carries a high cost to the government.” What the heck? Now there is a turn of the tables.

These days - more than ever - experience counts!

541.318.0888

Extension of SBA Loan Limits & the FTHB Credit

Thu, 29 Oct 2009 10:50:28 -0500

Rates continue to be excellent for home buying and refinancing, whether for personal use or investment. And while the MBS prices just dropped below the 200-day moving average we are still in better territory than we were all summer which was very good on its own.

Commercial property loans have also benefited from the improving rates recently. And while many lenders are just saying “no!”, Signet Mortgage’s lender connections are closing commercial purchases and refinances for owner-users and investors. During this past week, the White House was actively pushing for extending small business lending options (click here.). The key improvement that may affect commercial property owner-users is the expansion of limits where prior SBA caps were in the $2M neighborhood, would be moved to $5 - 5.5M. This will allow operators with existing SBA loans to go back to the well for additional loans. We are tracking legislation sponsored by Senator Landrieu (D-LA) to implement that change.

On the Homebuyer Credit front, hearings on the topic drew some attention in the week. For a good summary from Bulletin writer Keith Chu, scroll to the very bottom of this newsletter. One of those giving testimony was Senator Johnny Isakson (R-GA) who has been a Realtor in his career. Senator Isakson made a passionate plea for extension and expansion of the credit through the middle of next year. Other senators listen to him on Real Estate matters. Isakson’s testimony complete with charts showing examples of the pricing meltdown and the effect of foreclosures in the suburban Atlanta area is interesting and you can view it by clicking here.

A quick note on the residential lending process: I’m sure you have all experienced of heard of difficulties with residential appraisals recently. This has been the result of the HVCC imposed on banks and therefore borrowers by the NY State Attorney General. There is currently legislation making real headway in congress that would overturn the HVCC, allowing qualified lenders and brokers to order appraisals again. Another processing matter you need to be aware of is the change to Truth in Lending (TIL) rules. The effect is a 3-7 day disclosure requirement at the end of the process that can extend closings. Make sure you have baked in enough time to cover these longer turn times when writing contracts.

If these process headaches have been making you ill, you will want to check the helpful chart further down that compares the H1N1 swine flu symptoms to the common cold. Most important to remember is, if you have the flu, stay away from others for 24 hours after your fever (100°) has subsided for 24 hours without fever reducing aids like Tylenol

Important economic news in the coming week includes housing on Wednesday, jobs and GDP on Thursday and Consumer Prices/Inflation (PCE) on Friday.

Through all of this, rates remain fantastic. Is there anyone you know who would benefit from receiving this kind of timely information? Please hit the reply button and let me know – I’ll be happy to help them make informed decisions in this important time. Or give me a call anytime at 541 318 0888. I look forward to helping you, your clients, family and friends get the best professional advice and service available. Make it a great week!

These days - more than ever - experience counts!

541.318.0888

Fall Colors Bring a Chill of Inflation

Thu, 29 Oct 2009 10:45:12 -0500

Fall colors are in full swing and the chill of inflation is just starting to be seen in early reports. While we don’t feel inflation will roar until unemployment has peaked and a hot economy starts to pay more and hire more, it will start to make its presence known in the coming months. This week we saw it in the CPI numbers coming in a little higher than expected and a little higher than the prior month, too. Only a tenth higher and that wouldn’t be as concerning except for the fact that the CPI measure includes all the cash for clunker rebates as if they were price decreases. Certainly we would have seen an even-hotter CPI increase if the pre-rebate price had been used. Another small indicator was the NY State Manufacturing index coming in at 34.57, not high on its own but when compared to expectations of 17.25 it was noticed.

Remember that two things drive long-term real estate interest rates: INFLATION and SUPPLY AND DEMAND. On the scorecard, mark inflation as a tiny rattle of the sabers this week. Supply and Demand remains in our favor, BUT we like Belshazzar are reading the writing on the wall and it too isn’t pretty for the near future. The Fed purchases of MBS will taper off but continue through about 3/31/10. Over the past many months they have purchased at about a $25B/wk run rate. This week was $16B and on average it would be near $14B to hit $1.25T in March. You can mark your scorecard here as Writing-on-the-wall, still helping but it won’t be there for long.

One further indicator we use measure the two keys mentioned is the words of the Fed. And this morning, even as we write, Fed Chairman Ben Bernanke is speaking in San Francisco. Watch for news on this tonight and in the a.m. to see if he gives any further hints on their exit strategy from the current near-zero interest rate policy, weak-dollar actions and inflation watch. Another powerful voice is FDIC Chairman Sheila Bair. She testified before the Senate Banking Committee this past week that the biggest pressure that will bear on insured lenders in the near term will be troubled commercial real estate (CRE) loans. She recommended modifications and workouts as the way to head off this trouble at the pass. Watch for more news on CRE workouts.

On the Legislative front, Homebuyer Tax Credit extension bills are multiplying and sitting. The Military Extension that passed the house waits in the Senate Finance Committee for discussion and eventually a floor vote. The other extension bills are in two camps, the “As-is until June 1, 2010” camp and the “Take-it-to-the-Limit, $15k, All-Buyers, January 1, 2011” camp. The latter sounds like the NAR drafted the bill. In fact, the chief proponent of that approach, Senator Johnny Isakson, R-GA, spoke up this past week. He wants the “All-in” approach but is willing to extend it just to June 30. Read his entire comments by clicking here, or read a taste of it: “So I would submit that when we look at the sunset date of November 30 on the first-time home buyer tax credit, we should extend it--not forever but through midyear next year, to the end of June 2010. There is a reason for that recommendation. The worst 3 months of the year in any housing market anywhere in the United States are December, January, and February because it is winter and because it is the holidays.” Right now bills for both camps are in the Senate Finance and the House Ways & Means committees. The working proposal for paying for either camp is now to ratchet back some of the discretionary ARRA stimulus act spending, and reallocate it. We’ll keep our eye on progress there and let you know.

Catching up on the recent blog posts this one is from 10/19 - if you would like to receive these real time, send me an email: dave@signetmortgage.com.

These days - more than ever - experience counts!

541.318.0888

Homebuyer Tax Credit Legislative Update - Military Extension Passes House 416-0

Tue, 13 Oct 2009 09:14:52 -0500

Progress Continues on Credit Extension Bills – Military Extension Passes the House, Moves to the Senate

The US House of Representatives passed H.R.3590 on a roll call vote 416-0. This bill, officially named the “Service Members Home Ownership Tax Act of 2009” extends for 12 months the familiar first time homebuyers tax credit for those military and government employees who have served overseas for at least 90 days in calendar year 2009. A full summary of the legislative activity can be found by clicking here. It has now moved to the Senate where it has been read on the floor and referred to the Senate Finance Committee.

The Senate has a broader effort to extend the existing tax credit for all first time homebuyers by 6 months. Senate bill S.1678 remains in the Senate Finance Committee with a Sponsor and 11 heavyweight Co-Sponsors waiting for debate. A full summary of this legislative activity can be found by clicking here.

Some other points of interest: the Service Members extension has a cost to taxpayer. All legislation must pay for itself. In this case the bill includes provisions to increase estimated taxes in 2014 and increase penalties on filers of Partnership and S-Corporation tax returns. The Senate version, will have a much higher price tag. The legislative text of this bill does not yet have a method for payment. The broad reaching Senate bill has been tagged with a Halloween target date for action. The play out of these two bills will be interesting.

These days - more than ever - experience counts!

541.318.0888

Bernanke influences supply and demand on interest rates

Mon, 12 Oct 2009 20:34:08 -0500

We have some great things learned in this past week and if you take nothing else away from today’s email remember 2 things:

Rates are still unbelievably good, near 5.125% with no origination and 4.875% with normal origination and closing costs for conforming, conventional 30-yr Fixed, principal and second home purchases; and
Don’t sit by waiting for improvement in rates. If you have a friend or client who wants to sit by and see if they can get to 4.5% or 4.625% like we saw earlier last week, advise them to take anything near 5%.

The bond market (MBS) dropped off suddenly on Friday and while the big red bar in the chart below has some technical movement (30-day rollover) that makes it look worse than it is, it was still a rocket sled ride from 180 day highs we were enjoying. What happened? A few things:

- Stocks got a jump start on expectations for this week’s earnings season (buy on the rumor, sell on the news);
- Jobless claims came in better at 521k than expected (but really! It is still ½ a million jobs lost);
- Bernanke spoke about protecting against inflation (it’s all about inflation);
- Ben also reiterated that unemployment will get to 10%; and
- the unspoken and perhaps biggest factor: the lower rates of the past 17 days spurred more demand for MBS than buyers – a first real sign that the Fed tapering off over the next 180 days will put upward pressure on rates

In the commercial lending arena, the looming refi needs (>1 Trillion in next 18 months) continue to be a dark cloud on the horizon as lender credit is still limited. There is some hope for additional Treasury purchases of CMBS, but no real sign from them that it is forthcoming. We are still hoping the Goldman Sachs projection has legs that 10-year treasuries will get down to 3.0% before rising, but they snapped back up above 3.25% again this week and it is inflation and supply and demand there as well. We still have lenders making great commercial loans on Owner-User AND Investor properties with good economics and strong borrowers.

Quick update on the two key bills addressing the $8,000 homebuyer tax credit (if you missed the Thursday full report click here): The Senate bill only added one senator since last Monday, but it is Christopher Dodd, once again a very influential, power-broker. The Charlie Rangel bill focusing on servicemen added 11 Congressmen since Monday and is now up to 40 Co-Sponsors. Our expectation is that these two will be the ones to make it into conference for a battle that will determine if anything gets extended. The hope is still for action by Halloween, but there was not further indicator this week that this will be met. The White House remains mum on the topic.

Career advice: check out the discussion below on feedback and 360 reviews made easy at checkster.com. Something to consider with your bosses, peers, and key customers.

In the meantime, the rates are fantastic. Is there anyone you know who would benefit from receiving this kind of timely information? Please hit the reply button and let me know – I’ll be happy to help them make informed decisions in this important time. Or give me a call anytime at 541 318 0888. I look forward to helping you, your clients, family and friends get the best professional advice and service available. Make it a great week!

These days - more than ever - experience counts!

541.318.0888

Homebuyer Tax Credit Extension by Halloween? Trick? or TREAT?

Thu, 08 Oct 2009 10:39:28 -0500

While the White House remains mum on the topic, an interesting battle is developing in congress around extending the current $8,000 homebuyer tax credit. Two bills have been introduced with very different objectives. Let’s hope the two merge into a true extension of the credit before it expires in 53 days.

The House Bill H.R.3590, introduced by Charlie Rangel (D-NY), has added 10 more co-sponsors just this week, now with 40 congressmen pushing for it. HR3590 would extend the credit through 2010, but unfortunately, only to certain servicemen and other federal employees.

We are more interested in the Senate version, S.1678, introduced 3 weeks ago by Senator Ben Cardin (D-MD), which would extend the credit as is, to first-time homebuyers buying before June 1, 2010, fully a 6-month extension. The Senate bill has just this week attracted 2 more co-sponsors including Oregon’s Jeff Merkley (D-OR). The good news is that this bill already has 11 Senators backing it including Senator Harry Reid, Charles Schumer and other powerbrokers, more than 20% of the Senate and from both sides of the aisle. The bad news is that as this is a revenue matter, it must be initiated in the House.

This takes us back to the House Ways and Means committee, chaired by Charlie Rangel, sponsor of H.R.3590. With the legislation process being much like the sausage-making process, bills will rise up in committees of both houses, be voted-on and referred to their respective floors, debated and voted-on separately and then referred to a conference committee where the final legislation will get hammered out and returned to the floors for another vote. Note that at least 4 competing bills around this topic currently languish in Ways and Means. Which do you think Charlie Rangel will allow through to the floor?

We’ll keep an eye out and let you know the developments. In the meantime, here are the words used by Senator Cardin when he introduced the S.1678 on September 16th. Note that he was then and is now hoping for conclusion before November 1. Maybe a Halloween treat; or is this just a trick?

[photo courtesy of sxc.hu]

From Senator Ben Cardin (D-MD). “The legislation I am introducing today with my colleagues Senators Ensign, Harry Reid, Isakson, and Stabenow would change the expiration date from December 1, 2009, to June 1, 2010.

“I know my colleagues understand the time delay here which requires that the houses go through settlement in order to qualify for the credit. So I think it is important that we act timely, not waiting until November 1, but to try to get this bill moving quickly. It has been an incredibly important tool to help the housing market to help restore our economy.

“This is a direct extension, a clean extension. It basically extends it for 6 months. I have talked with my colleagues about ways this credit perhaps could be improved, and I know we will get into that debate. But I want to make sure we don't have a lapse in this credit being available to help first-time home buyers. It has been very valuable. As we work to perhaps modify this proposal, let us make sure we continue it so as we are fighting to get our economy back on track, we don't regress and lose this tool that is available to help the housing market.

“The credit has been a huge success in helping to revive a depressed housing market.

“As many as 40 percent of all home buyers this year will qualify for a credit. That tells us this credit is working. It is getting people who have never owned a home before into the home-buying market, knowing that the Federal Government is providing an incentive. It is estimated the credit is directly responsible for roughly 300,000 to 400,000 purchases this year. According to the National Association of Realtors, those additional sales have pumped approximately $22 billion into the economy. This is a modest tax incentive to help an industry that is vital to our economy, that produces an incredible amount of economic activity and jobs. Mortgage applications increased nearly 10 percent for the week ending September 3 from late August, the largest gain since early April.

“Extending the credit is prudent and a fiscally responsible measure. It provides the help. We know it works. We know what has happened. We know we are still in difficult times. It is not the time to eliminate this tool that we have available. That is why I am recommending an extension, not a permanent extension, because we want this credit to be available to get us out of our current economic problems. We know we still need it. A 6-month extension is the minimum we should do. At the same time, we should look at other ways to improve and help the housing industry and to help the recovery of our Nation.”

These days - more than ever - experience counts!

541.318.0888

Is it a W-Recovery? Watch the FDIC this Friday!

Thu, 08 Oct 2009 09:50:48 -0500

[This post was originally emailed to subscribers Monday October 5, 2009 - If you wish to subscribe, just send me an email - dave@signetmortgage.com]

The residential mortgage rates continued to improve throughout the week so we are now back into the record territory enjoyed before Memorial Day! See the chart below for MBS numbers and remember that “up” is positive on this chart. Rates are great and we are running out of runway on the $8,000 tax credit (56 days remain!) but we can still get in if you act quickly.

Sunday’s surprise blanketing of show here in Bend, OR was nice until the trees started breaking. The stock markets climb over the past 6 months was encouraging, until the supports started snapping. Dr Nouriel Roubini (NYU Econ Prof who predicted the subprime and economic meltdown, aka Dr Doom) is admitting that our present condition is rosier than he predicted, but sees the recovery as “anemic” over the next several years. This is in sharp contrast to the V recovery baked into the stock market today and a correction is at hand. This is consistent with the concerns raised for a W shape to the stock market where we are now into the 3^rd leg. Money coming out of the stock market over the next months could help mortgage securities attract investors, offsetting some of the Fed pull back in investment. Certainly the MBS activity of the past 2 weeks (see chart below) shows tremendous positive activity and loans locking in the 4’s again is the result.

Banking Update: This week had some significant news for lending banks, both residential and commercial. Banks throughout the country are either regulated by the OTS or the Comptroller of the Currency, but all are members of the FDIC. That insurance consortium survives on insurance premiums paid by member banks. This week, Sheila Bair of the FDIC proposed for banks to prepay up to $54B of fees covering 2010-2012 (click here.) This added cost will be spread out over the 3 years, but will likely cause lenders to seek offsetting revenue to offset the cost. Loan fees and interest rates are where banks make the money to pay these hefty insurance premiums. Watch for conclusions on this prepayment proposal, the beginning of funding the FDIC.

Also on the FDIC front – watch for news this Friday of FDIC bank takeovers surpassing the 100 mark. As of last Friday, the number hit 98 with 3 new failures costing the FDIC about $300 million (for more, click here.)

Homebuyer Tax Credit Update: The legislation continues to garner support with 2 new Senators and 5 new Congressmen jumping on board as Co-Sponsors this week, though both bills languish in busy Committees. The increasing support (most notably the powerful Senate Majority Leader, Harry Reid) is a good indication this will pass extending the current December 1, 2009 date to probably June 1, 2010, though much will have to happen before that can be the case. (Two things you don’t want to see made – sausage and legislation.) I am giving it a better than 50/50 chance though with the increasing support weekly. Watch for my updates on Twitter if you want to hear anything between the Monday weekly reports.

These days - more than ever - experience counts!

541.318.0888

FOMC Announcement Shakes Up to Favorable Side

Thu, 08 Oct 2009 09:43:09 -0500

The Fed did shake up the market a bit with their FOMC announcement (click here) on Wednesday. The interesting thing is that the only real news was that their purchases of $1.25 Trillion of Mortgage-Backed Securities (MBS) would end NOT by Christmas, but taper off into March. No more or less purchased, just spread out (less per week) for the coming 6 months. The market loved the deferral of the end even if it means lesser appetite in the middle. Loved it so much that as you can see in the chart down below, MBS are now enjoying their best levels in the 90 day window, not quite as good as 6 months ago, but still exceptional. Interest rates are fantastic, and this party won’t last forever.

Speaking of deferring the END, what have you heard lately about the $8,000 real estate tax credit? Here is some scoop. About a week ago, 5 senators introduced Senate Bill 1678 and last Thursday, two more senators joined them. This bill would extend to June 1, 2010 what otherwise will expire December 1, 2009. No other changes are proposed. Sen. Isakson, a cosponsor to this bill, had previously been adamant on expanding to all buyers and not just First Time Home Buyers (FTHB) and expanding the dollars. He now has joined this group to get something rather than nothing passed. By the way, the companion bill in the House, H.R.1993 introduced last April, has 28 co-sponsors including 4 who joined on last week.

The California Association of Realtors came out with a report (click here) based on surveys indicating that nearly 40% of California FTHB would not have purchased a home if the federal tax credit incentives were not available. Interesting. Again, this party won’t last forever. In fact, transactions have to close within 63 days to qualify, unless the extensions happen. NAR is suggesting that offers need to be made in this week if they are to have a chance of closing on time. Recognize that there will be a huge crunch on lenders and especially title companies and that is Thanksgiving weekend! Don’t go slow and don’t even think about short sales.

[This Post was first sent out on September 28th. If you wish to receive real-time email of these postings, send me a note to dave@signetmortgage.com]

These days - more than ever - experience counts!

541.318.0888

Interest Rates IMPROVE even with Stocks up 50%. But watch for Year End Blues!

Thu, 08 Oct 2009 09:36:07 -0500

Have you enjoyed the 50% ride up in the stock market since lows of March 2009? I hope you aren’t one who rode it down, got disgusted and finally pulled out of the market just before it took off again. There is quite a bit of talk of another dip coming in stocks – some even predicting going lower than March. I’m not an expert there, and have no predictions, but I do have interest. Normally the stock and bond markets run contrary based on fund flows (today being an example with stocks falling and bonds improving – thereby allowing interest rates to drop.) But for the past 6 months, rate-influential Mortgage-Backed Securities (MBS) have done very well, thank you, even during this baby-bull run.

It brings up some plusses and minuses to be thinking about coming into the 4^th quarter. Here are some looming actions that should not be disregarded as you encourage clients or make plans:

The end of the $8k tax credit is 70 days away. Funding and closing by Monday Nov 30^th or nada.
The Fed will stop buying MBS near the end of the year. They’ll be close to but short of $1.25 Trillion target.
The temporary, expanded conforming limits ($729,750 in much of CA) end 12/31/09.
Plus normal, seasonal trough in January all lead to a tough start of the year in 2010.

On the flip side:

Interest rates are at 90 day bests
MBS are being supported by 200 day moving averages
Demand for Treasury notes has continued to exceed expectations leading to overflow demand into MBS
Historical precedent of ~30 months post recession end (declared this past week by Bernanke) before the Fed starts raising rates (hard to believe it will be that long this time but that is the history.)

All of this leads me to one thought – “Make hay while the sun shines” because it is shining brightly right now.

More on housing and the coming week’s indicators below. This past week, we Tweeted on the Tax Credit extension discussion (now down to 70 days remaining); the Goldman report projecting 10-yr Treasury rates to drop from over 3.4% to 3.0%; inflation seen as benign and the Fed statements from Bernanke, along with a great video of Roger Federer magic. Hope to connect with you this week!

These days - more than ever - experience counts!

541.318.0888

Unemployment or UNDERemployment?

Thu, 08 Oct 2009 09:11:37 -0500

So is it really the unemployment number or the UNDERemploymnet number that keeps buyers out of the market?

First let’s look at jobs and inflation data. The Jobs report on Friday was a bit of a surprise with fewer jobs lost (216,000 non-farm payroll) than expected (250k) and fewer than any month in the past year. Many are taking this as another sign that we are near or at the bottom of the recession. The turnaround call could be correct as the employment numbers always lag quite a bit and will continue to worsen even as GDP starts to rise. Even with the better than expected job loss number we need to keep a few things in mind. The number is always very preliminary and will very likely be revised down as the last 2 months were revised this week by another 50k each. The population dynamics are such that 130k jobs must be added just to stay even. This helps account for the unemployment number rising to 9.7%, its highest point in more than a quarter century (it was last over 10% when I came into the job market out of Grad School). In the past 24 months (shown at right) the unemployment number has risen more than double. This is still expected to rise to over 10% before the winter sets in.

The other measure of unemployment is derived by adding in the “under-employed”, those wishing to work full time but only able to have part time jobs. This combined number hit its peak this week at 16.8%, up from 16.3% last month. Still looking at the chart on the right, perhaps the best indicator that the economy is recovery has begun is the 12 month change in the unemployment number which in June was +3.9, July +3.6 and Aug +3.5. This downward trend represents a solidifying and even a start on the recovery.

That being said, we are now talking about 6.9 million jobs lost since the peak in the business cycle. This number is to me the saddest number in the review of our economy and makes me really look forward to the upturn. For further employment analysis click here.

The inflation component of the jobs report shows that the average hourly earnings rose 6 cents on the month and 2.6% y-o-y. This compares to 3.6% in the prior year and is perceived as an inflation-friendly, low number. Remember that inflation is the real driver of long-term interest rates. Further inflation confidence (“subdued”) came as the Fed published Minutes of the August FOMC meeting (click here for the full report). The most heartening news from the report includes this continuing quote: “economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period” which matches the past few FOMC findings.

The Fed’s assessment of real estate markets was also interesting. First the good news – in residential real estate “home sales, prices, and construction had shown signs of stabilization in many areas and were increasing modestly in others.” On the other hand, commercial real estate is seen as “being weighed down by deteriorating fundamentals, including declining occupancy and rental rates; by falling prices; and by difficulty in refinancing loans on existing properties.” This, of course is where Signet Mortgage comes in. While the refinancing of commercial properties is very difficult, we have had great success in placing loans nationally where lending is still being done. If you would like to read a report of FDIC Chair Sheila Bair calling commercial real estate a “looming problem”, click here.

Finally, in residential lending, the interesting trend (and entirely consistent with our own experience at Signet corporate-wide) is that now fully 23% of all mortgage originations are FHA loans. For the full report, click here. In fact the only surprising thing to me is that this number is up from 3% only 2 years ago. The other encouraging trend we have seen at Signet is that the vast majority of borrower applications are being accepted by our lenders. Our business is based entirely on referrals and so we get a higher percentage of highly qualified borrowers than those that rely on advertising, but we have been able to qualify a huge percentage of the borrowers that come our way. Appraised values still make some refinancing loans more difficult but a very low percentage have run into this.

Much of the information noted above was interesting enough in the middle of last week that we tweeted them as they were happening. If you want to see this type of info real time, you can follow us on twitter by clicking here. Once you get to that page, click on the “Join today!” button if you haven’t already joined, then the “follow” button. You don’t have to send tweets to follow on Twitter. In fact, you can choose to have tweets sent as a text message to your cell phone and you never need to even go to Twitter again on line if you don’t want to. Just follow DaveWoodland and then click “device updates on” and input your cell phone information. Very easy

It has been two months of weddings and travel and I am now catching up to input the recent blogging. The following was originally sent out September 7, 2009. If you would like to receive live email postings, send me an email at dave@signetmortgage.com.

In the meantime, the rates are great and programs are available. We are still riding on exceptional opportunities. Let’s make it a great week!

These days - more than ever - experience counts!

541.318.0888

Seller Credits: Playing Footsie Under the Closing Table Or Playing by the Rules?

Fri, 17 Jul 2009 10:06:53 -0500

A mortgage lender colleague posted this blog yesterday with information about working with seller credits. Everyone should read and understand this – whether you are a buyer, seller, or represent either one. Signet Mortgage is a licensed mortgage broker in California also. Our founder still operates the headquarters in San Ramon, CA and we are licensed in Arizona, Utah, California and Oregon.

“Today, more that ever, experience counts!” ^sm

Dave Woodland

Signet Mortgage – Bend, Oregon

541.318.0888

ML-4171

Via Janet Guilbault California Mortgage Banker/Broker:

Recently, a featured post told the story of an agent who decided to "SAVE" a real estate sale because the lender refused to allow a $7000 credit. He believed it was okay to exchange some funds under the table to solve this problem.

Ha! We knew better over here at ActiveRain. Just those words "under the table" sent shivers right up our collective spine.

The real estate business does not allow anyone to play footsie under the table with buyer and seller funds.

Should the agent have been in a position of "money laundering" $7000 that the seller owed the buyer?

No. Any mortgage person has the ability to calculate the allowable seller credit based on published lender guidelines.

In my opinion, all credits to the buyer need to be addressed before an offer is even written for 2 reasons:

Because they are directly tied to closing costs

Because they must conform to strict lender guidelines.

Five important points to remember about seller credits before an offer is written:

Credit can ONLY be used for CLOSING COSTS. Not for the down payment. Not for repairs to the house.

Amount of credit has a limit: Maximum allowed in most cases is 6% of the selling price.

Some lenders will only allow credit to be used for non-recurring closing costs. Some will allow for recurring (tax impounds, interest paid in advance, homeowners insurance, etc), as well as non-recurring.

Credit does not need to exactly match the amount of the closing costs, because anything "left over" can (and should be) be used to buy down the rate. There are limits to the amount of interest rate reduction you can buy.

A buyer cannot get CASH back if the credit exceeds the closing costs.

Five important things a buyer needs to know about seller credits:

By choosing a seller credit instead of a lower price on the house, you will pay higher property taxes(may not be true in all states, is definitely the case in California).

If your seller credit is large enough to allow you to buy down the interest rate, this can definitely be ADD TO YOUR ABILITY to buy a more expensive house. It will lower your payment more than it will raise your taxes in most cases.

THE HOUSE STILL HAS TO APPRAISE! If you raise the price by $20,000 to get your credit, the appraiser may not agree with you. The seller credit cannot be FLUFF added to the value of the house.

If you are only going to make offers on bank owned properties, your ability to get a seller credit is lessened.

Seller credits often become a negotiating tool. For this reason, making an offer requires that you already have a SOLID estimate of your closing costs (good faith estimate). This will dictate the final amount of cash you will need should the seller counter with a lower amount of credit.

Written by Janet Guilbault, Mortgage Banker/Broker based out of the San Francisco Bay Area

Ask Janet a question: jguilbault@rpm-mtg.com

These days - more than ever - experience counts!

541.318.0888

203k Made SIMPLE? Yes, for your clients..........

Wed, 15 Jul 2009 14:19:11 -0500

One of my mortgage lender colleagues posted this blog touting the great benefits and (somewhat) ease of use of the FHA 203(k) renovation financing programs. Signet Mortgage does home renovation purchase loans where simple to complex repair and remodeling may be required and it is all supported by government guarantees. I’ll post more later, but wanted you to see the general works of it through Colleen’s post below. If you would like to download a flyer with details, click here!

“Today, more that ever, experience counts!” ^sm

Dave Woodland

Signet Mortgage

Via Colleen Craig (Southern California Mortgage Professional):

203k MADE SIMPLE?

Ok, maybe not, but I will attempt to make it as simple as possible for the client to understand and want to read on.  For many of us in the business who are " in the know" we forget that we need to go back to the basics and spell it out in simple terms for others to understand. So I've compiled some information based on my most recent commonly asked questions just this week.

In Southern California, FHA loans were just not utilized over the past 10 or so years because of the FHA Maximum Mortgage limits But now that the limits have been increased and the prices have decreased, FHA loans have become the most utilized loan in recent months. HOWEVER, because it was not a popluar loan, you would be amazed at how many lenders/brokers do not know what they are doing. Especially when it comes to the 203k loan. I spoke to a client today that was given such mis information it made me cringe.



Apparently they told the client that 203k loans were no longer being done (Gee, you think it was after realizing that they had no idea what they were doing?) and they tried to flip them into another loan. This was after telling my client that their loan amount would be for the contract price and the extra money would just be separate and sit in an impound account to be disbursed over the next 6 months. Ok partially true, the extra amount would be in escrow to be disbursed as the remodel progressed, but for free? Who pays for the extra 50,000 dollars you just borrowed for repairs? Your loan amount is for the entire amount you are borrowing. Makes sense right?

So what is a 203k loan and why use one?

When a buyer wants to buy a home that needs repairs utilizing FHA financing, normally the repairs would have to be completed prior to the close of escrow.   The repairs would normally fall on the responsiblity of the seller. With so many foreclosures in today's market, the bank is the seller. And many times the home in need of repair is listed "as is". Which in the past would require a cash buyer or conventional financing. This is another reason that people in the business decided to shy away from FHA loans. I believe it was pure ignorance of the programs that were available by the brokers and the realtors couldn't properly prepare their seller for what to expect that gave FHA loans a bitter taste.

My associate Jeff Belonger said it best in his post about ignoring what your listing agent tells you about FHA loans

Here we go....203k loans for dummies



* 203k loans allow you to FINANCE the cost of the repairs in the new loan amount. (Not to exceed 110% of the after improved value determined by the appraiser and 203k consultant) What does this mean? I buy a house for 200,000 that needs 50,000 in repairs and I can borrow the extra 50,000? Too good to be true? NOPE. That's it in a nutshell....

ok details please.........

* Down payment is basesd on the sale price PLUS the final cost of the repairs x 3.5% so for example:

Sale price is 200,000 (DO not calculate 3.5% on this) PLUS 50,000 in repairs/costs (which includes certain costs and reserves the lender will require) 250,000 x 3.5%. Down payment is $8750.00 (closing costs are separate as usual)

* Buyer will hire (lender can recommend) a HUD approved FHA 203k Consultant  to go to the property with the buyer to determine the required repairs and wish list repairs.

The fee charged by the consultant can be included in the mortgage. The fee can range anywhere between $ 400 to $1200 depending on the repairs required. Please check with the consultant prior to scheduling your appointment.

*Buyer will obtain estimates from several licensed contractors for the work to be completed depending on how extensive the repairs.

Three estimates are recommended for each contractor but not necessary. The buyer can act as their own general contractor only if experienced and licensed. (FHA says experienced, but most investors require the buyer to be licensed) The contractors must provide documentation to be approved by the lender prior to approval.

The consultant will determine the "required" repairs versus the "wish list repairs". You must start with the required repairs and then move on from there for you wish list. This is an important step for the consultant and appraiser so that you don't over improve the home and exceed the comparable properties in the area.

* Once the consultant completes his report of required and wish list repairs, the lender will forward it to the appraiser for an "After Improved Value". This is where you may run into problems with OVER improving the property based on current values. Between the consultant, appraiser and buyer - the FINAL FINAL report will be tweeked to come up with a final report that the contractors will be hired to do.

* So now the file is submitted to underwriting and approved ( you need to qualify at the full amount you are borrowing of course, which may include your current mortgage payment for the home you will live in during the rehab period) and the normal steps for closing will occur.

(BIG PLUS - you can include 6 months of mortgage payments in the new loan amount since it's assumed that you will have TWO housing payments during the rehabiliation of the new home. This money will be deducted each month during the reahab process) This is optional.

* Closing occurs, and the work begins within 30 days of closing/funding. (This is when your mortgage payments start since this is when you started borrowing the money - however, if you included the 6 mths mtg payments, they will be deducted from escrow starting when your first payment is due)

* Disbursments are made throughout the following 6 months from the escrow account (normally 4 draws with one final inspection, but this can be increased for higher repair amounts) as the work is completed.

Remember you paid the seller for the price of the home, and then you borrowed an additional amount of X which is sitting in an escrow account to pay the contractors (your total loan is the total amount you borrowed)

Once the last disbursement is made and the final inspection showing COMPLETED AS PER THE CONTRACT........you are done! Simple ast 1 2 3 - okay maybe not, but that's why having an experienced lender on your side is crucial!

There are specific properties and repair requirements for this type of loan, so please call me for specific details if this sounds like the right loan for your new home.

Please send me your before and after pics! I would love to see them and maybe even post them for people to see what can be done with this awesome program! Or contact Colleen Craig FHA 203k Specialist for more details

Happy Rehabbing!

These days - more than ever - experience counts!

541.318.0888

One Bad Apple Maybe Spoiled the Whole Bunch Girl! HVCC medicine may be working?

Wed, 01 Jul 2009 00:13:10 -0500

I had a good conversation today with a trusted appraiser I know who surprised me with his comments about the HVCC. I fully expected him to be put-out by the audacity of it all. Certainly the misinterpretations opened up by the 1004MC (market condition report) would be a concern to him. Listen to some of his response:

"Honestly, I’ve really like the overall effect the HVCC has had on the appraisal industry, and get a little offended to hear the critics. I truly believe that the low appraisal values that are being reported are a measure of how much influence lenders had on their “preferred” appraisers. Since the implementation of the HVCC, I have begun reviewing appraisals that would not have previously gone through the AMC’s, and I am shocked at how bad the appraisals by those “preferred” appraiser’s have been. It is obvious to me that there are some appraiser’s that “cherry pick” the comparables to hit a value and overlook more relevant sales closer to the subject. Based on the reviews I have done since the implementation of the HVCC, the legislation was needed, and I can now understand why the industry has been blamed for the mess we are currently in."

Imagine that. A very successful, hard-working, ethical appraiser sees the benefit of the HVCC. Perhaps all that whining about lower-quality, unrealistic-valued appraisals exacerbating the spiral of housing prices is not the right whine. Maybe there has been some apple shining that can be leveled-out a bit here. I personally believe the “few bad apples” have spoiled the “whole bunch girl” (with a nod to J5 and respect to the late-MJ) and I wish it hadn’t happened or didn’t have to happen. But here we sit and there continue to be some bad results from the current system. I don’t have the solution for this, just offering food for thought.

The thing that opened my eyes to my own profession of loan originators as being a culprit in spoiling some of the apples was this comment:

"Since the HVCC, I did an appraisal for one of those clients that I had previously refused to work for because they insisted they would not pay me for the appraisal if I did not come in at a value high enough to close their loan. I wouldn’t have had the chance at their business, were it not for the HVCC. Now I can complete their appraisals without the looming thought in the forefront of my mind that they might not pay if the value is too low."

Whoa – shame on us for influencing the system to misrepresent values to get deals done. I know these are rare exceptions (at least I hope so) and I am sorry they caused the whole system to change (the new logistics are simply put, a real burden) but if this was happening in even 3% of the transactions out there, the impact to shareholders and now taxpayers is awful.

We ended the conversation with agreement that the burdens and relationships are less desirable, but perhaps necessary. We also agreed that the 1004MC will be a problem when the trend is shifting from down to stable to up and the mechanical form may not give the reviewer enough knowledge to make an appropriate judgment. Let’s hope there is a better ability to transfer personal knowledge of the complete picture and avoid a lengthening of the trend that would be unintended.

Here’s to honest appraisers who held firm and continue to ply their trade with integrity! I hope you each do well in this transition

Dave Woodland

Signet Mortgage

Bend, OR

These days - more than ever - experience counts!

541.318.0888

Treasury Note News Becomes Good News

Tue, 30 Jun 2009 23:20:02 -0500

It has been a great week for long-term mortgage rates! Before I get to some of the causes and what we can anticipate, let me make a quick report on the state of banks and their willingness to lend. If you follow me on Twitter, you saw that another local lender just shut their doors on lending to commercial property investors. I know of two stellar investor deals with exceptional guarantors who were turned away from what I believe is the last remaining local bank who was lending on investor deals. That closing leaves Signet Mortgage as the sole channel to investor purchase- and refinance-money for CRE in Central Oregon. We’ve always been the best source but now it looks like we are a lone source. There’s a reason we say: "Connecting Locally - Funding Globally."^sm Our funding sources are from all over the country and are still active and available to you right here in our market. So why did the local bank not lend to these gold-plated investors? The bank examiners from the US Treasury (in this case the Office of Thrift Supervision) established limits by loan type at such a level that prevent them from making investor CRE loans. This is part of the “Big Pendulum Swing” I have been talking about. The effects of over-regulation are already starting to take a big toll on our ability to stage a full-blown recovery. More on this in the HVCC discussion below, but the take away here is: Signet still has the sources and will help you get your deal done.

The news in last week’s blog was the announced $104B float of Treasury Notes set for the 23-25^th. The announcement was so unappetizing and the fear of shrinking investors so high that on the day of the announcement, the buyers of related long-term Mortgage-Backed Securities voted with their feet and staged a sell off Thursday the 18^th. (see the big red bar just right of middle on this chart)

The good news is that throughout the week, as the Treasury Notes were actually issued, the demand was great (I heard it described as outstanding) and the traders of MBS charged back in with strong buying (all of the green bars on the right side, the last big green bar being last Thursday.) If you saw the Freddie Mac rate announcement on Thursday (reported in papers on Friday), the rates indicated (5.42% on conforming 30Y fixed with 0.7 pts) still hadn’t captured much of the improvement. We expect this week’s number will be better and Signet’s residential lending sources were providing funds at better than this number all during the week and even better today.

If you are a chart reader, you will enjoy seeing that the blue line above (the 200-Day Moving Average) acted as a firm barrier on Monday, Tuesday and Wednesday and that Thursday’s break-out day pushed us well above this tough hurdle, changing it now into a strong level of support (S1 above.)

What was the basis for the outstanding sale of Treasury Notes through the week? Investors in fixed-income securities were relieved to see the strong showing of China in the bidding. This released much of the tension that has surrounded the bond world for the past month (remember that China holds $763 B or 11.8% of the US debt $6.45 T). Some may attribute this bidding to the visit of Secretary Geithner to China some weeks ago. While the communication at that level is helpful, there really is only one driving force behind China’s purchase of US Treasuries. It is an offset to the trade imbalance and keeps making China’s huge export market work. With the US buying 5 times as much from China as it exports to China, the US dollar weakens. China can’t endure a weak dollar as it would make our buying power in China much lower. To keep the goods flowing across the Pacific, China buys US-T and thereby bolsters the US Dollar.

The existing home sales numbers were reported by the NAR last week and they came in good, but just a bit softer than expectations. Continued problems arising from the now regulated residential appraisal system have been called-out as a source of some of the log jam, slowing sales. Our experience with the Home Valuation Code of Conduct (HVCC) is that unintended consequences have really clogged up the residential lending system. Well-meaning federal legislators have once again created onerous regulation of an industry to protect us against ourselves. The effect of this over regulation is deals are being delayed and sometimes killed and consumers are being hurt. Some of you saw an article on this topic late last week (reprinted at the very end of this email.) The follow up to all of this is that two members of the House introduced legislation on Friday to create an 18-month moratorium on the HVCC while the kinks get worked out.

Many other big news items going on and we’ll be happy to share our information with you and your clients. Please give us a call anytime. These days - more than ever - experience counts! Signet stands poised, ready to help you. Make it a great week! - Dave

These days - more than ever - experience counts!

541.318.0888

It's all about inflation.

Tue, 30 Jun 2009 23:13:47 -0500

It’s all about inflation.

The markets have been moving in gargantuan steps over the past month starting on May 21, right before Memorial day with the first realization that all of the deficit spending needs to be funded with Treasury Debt offerings (duh!) More debt offerings mean two very bad things for mortgage backed security interest rates: 1) competition for fixed-income investor dollars and 2) more debt = more inflation. And recently, the competition has been fierce. This past week had some of the best and worst of the tug-of-war for investor dollars in play.

If you follow me on twitter, you saw that we continued a rocket ride up and on Wednesday hit a peak that put us up over 360 bps (basis points or 100ths of 1%) in pricing of MBS. We were glad to ride (float) that rocket Friday, Monday and Tuesday of last week right into lock mode Wednesday afternoon. The following day, Thursday, the Treasury announced a $105+ Billion supply of T-Bonds to be sold in this week and MBS fell off the map again. See the amazing first chart below and descriptions for the MBS activity over the past month relative to the announcements of treasury debt offerings. Then move on further down the page to the 2^nd chart and note that since its printing last week, we continue today in a green recovery mode. In fact, since the low on Thursday’s (red) pricing, we have risen over 130 bps again and today have already touched the 200-day moving average (blue line), recovering all of the loss that happened on Thursday. This has all been at the expense of the stock market, where the S+P at 944 appears to have become impenetrable.

This week, the Fed’s Open Market Committee (FOMC) will be meeting tomorrow and Wednesday and make a brief announcement at 11:15 am our time on Wednesday. While the Discount Rate is not expected to move, the description of Fed plans to buy Treasury and MBS will be interesting and their characterization of future inflation will likewise garner much attention. We’ll be watching that and the announcements of future Treasury Bond issuance.

Of significant interest in the long-run, but buried in the volatile short-term activity of the markets, is the heavy handed regulatory announcements from the Obama administration late last week. There is clearly a pendulum swing underway that has only begun to move into the “over-regulated” zone and is now beginning its upswing into even higher regulation. I experienced first-hand the effects of the pendulum swing into over regulation with the Sarbanes-Oxley act of 2002 and can tell you that the costs of such government intervention are easily double and triple the expectation. Watch for the unintended consequences of this to start becoming visible as early as the end of this year.

Signet Mortgage has lenders willing and anxious to help you close deals. Rates have crept up a bit, but we can work you, your clients, friend and family into the best available loan program and rates. Give us a call and let’s make it happen. Make it a great week! - Dave

PS – a quick shout out to Joanna Van Vleck and her successful startup of trunkclub.com, revolutionizing the way men buy clothes. Bend, OR is blessed to have many brilliant and creative people living in our area and Joanna’s global reach in a short time has been amazing. A welcome counterpoint to the NY Times article on the real estate retraction in Bend. There will come a time in the next 18 months where the migration in of those who recognize the great benefits of this area will be newsworthy again. In the meantime, rock-on Joanna and thanks for being part of what makes this place great. And if you were wondering, yes, Joanna is Paula’s daughter.

These days - more than ever - experience counts!

541.318.0888

Recent Surge Improves Home Loan Rates!

Tue, 16 Jun 2009 08:02:28 -0500

(originally sent to subscribers on June 15, you can subscribe too by emailing dave@signetmortgage.com)

Home loan rates have been the subject of much consternation in Washington, D.C. these past 3 weeks. There is serious concern that the rate rise we have just experienced may derail the recovery people have been feeling, and been starting to see as more than just “green shoots” but real growth. Has it been a false start? I know here in Central OR, our green plant shoots had some serious late-May freeze that false-started them off the charts and we had to start over with greenhouse grown plants from the local nursery. The stock market has spent these last two weeks bumping heads against its 200 day moving average and a 944 ceiling on the S&P that has been tough to crack. Let’s take a look at LT interest rates and come back to recovery scenarios.

Thursday we tweeted when the Fr Mac number came out at 5.59% (see chart immediately below). We are betting this week’s number will be another 20 bps higher as it takes at least a week for this number to catch up with reality. In the large scheme of things, 5.75% is a great number. In fact, where rates had been closer to and often above the 10% range over the past 5 decades, it was welcome to be at a 50-year low in 2003 of 5.25%, just 50 bps below the present 5.75% area. (BTW – that is a nationwide average; we are still writing loans at Signet Mortgage at 5.25% and better so it pays to work with connected brokers who can shop for you.)

If you compare the two charts immediately above and below, you will see the delay I am talking about. The MBS number fell off the table on Weds May 27^th in the first week of what has been a torrent of LT Treasury and MBS debt issuances – a supply that has simply exceeded demand. (See the huge red candlestick – more of a dynamite stick – on the left side of this chart.) You can bet that the banks raised their rates immediately that day. Some banks reissued their rate sheets more than 5 times in a single day on May 27^th. Above, however, you could see the weekly average on May 28^th stood still at that 4.88% line. So the delay is in the weekly average charting, not the rates available. Following that logic, take a look at the large green candlesticks on the right side of this chart –they represent last Thursday, Friday and today’s early activity.

We continue in a float mode right this moment as the bond market is recovering from “Bond Flu” that gripped MBS for the past two weeks. We are watching it carefully. It appears there will be some relief this week from the supply and demand woes of late. The Treasury is taking a week off after consecutive weeks of issuing an average of over $80 billion a week. On the demand side, there are now hedge funds and bond funds stepping in to buy bargains in MBS where it seemed only the Fed had been buying before.

So, where is the economy headed Green Shoot guy? There are many scenarios to choose from and I am still with the W recovery team. Not that what we have been seeing isn’t real improvement, I still believe we will fall some from this point before we go into full bull market run mode again. We have seen the dollar weaken for weeks now and oil prices climb from below $45 to over $72/bbl. Gas prices have risen for 45 consecutive days to be at a nation-wide average of $2.63/g now. Interest rates have braced against the fear of inflation and impending debt loads. This fear is real and the fall back that higher interest rates may cause in our recovery will likely bring a bit of an easing in interest rates. This morning’s NY Empire State Manufacturing Index showed contraction again at levels much worse than expected. This is the first bad news to hit after a raft of good economic news through May got us to the point that sent the red sled down the hill.

Again, with today’s rates and property values available, we have all-time best opportunities sitting right now on a signing table near you. Signet has pipelines into the best available rates and we are watching the timing for floating and locking. We welcome your input and look forward to serving you, your clients, friends and family. Let’s make it a great week - Dave

These days - more than ever - experience counts!

541.318.0888

MBS and Treasury Oversupply Trash the Mortgage Market

Wed, 10 Jun 2009 09:10:25 -0500

(Originally sent to subscribers on June 8th - Subscribe by emailing dave@signetmortgage.com)

Good Morning!

Mortgage Backed Securities (MBS) have had a miserable 2 weeks of sell off. A combination of inflation scare, over-abundance of available debt securities and improving stock market have taken MBS and the related yields and available market interest rates the wrong way. Take a look at the chart below at the long, and sometimes steep drop we have experienced in the price of MBS. As bond prices drop, yields/interest rates rise.

What happened to the steady rates in the 4’s? Through May 21^st, we had 3 straight months of steady rates. For the price of an origination fee we could get your conforming primary residence mortgage near 4.5% for 3 months. In fact, looking at the Freddie Mac Weekly Primary Mortgage Market Survey (click here) you can see that the market average was within 6/100ths of 4.80% for all of those 3 months, and this includes all lenders and borrowers, therefore higher than the better rates Signet Mortgage is able to provide you. The same Freddie Mac chart shows that as of last Thursday, the same number was already up at 5.29% and that was the weekly average. Look at the chart again for the most recent green bar. That was Wednesday and the cluster at approximately 100.00 was the week prior to that. See that Thursday and Friday following were steep drop offs. I fully expect this coming Freddie Mac weekly average (due out Thursday morning) to reflect a number above 5.4%.

So where are rates right now? Rates and lenders are all over the map. For the cost of an origination, we see our lenders offering 30 fixed conforming on primary residences at anywhere from 5.125 to 5.625% this morning. This range points out the importance of working with Signet Mortgage to get the best available rate. We’ll shop for you as favored lenders change seats regularly during these times.

The coming week has additional offerings of Treasury debt security offerings. The Fed and Treasury continue to try and balance their need for borrowing and attempting to keep the interest rates in check. For the past two weeks, this has been a losing battle. The Fed is buying $25-35 billion of MBS every week. So far they have bought just over $500 billion in this program. They intend to keep this up with a stated target of $1.25 trillion. But with the Stimulus Program and 2009 budget deficit spending, required Treasury spending is far-out-pacing the MBS purchases by 100s of billions each week. With all of that Treasury debt available, the competition for MBS is high and rates rise with it. For this week, the Fed reduced its plans for issuances with the bond market in turmoil, attempting to cool it off a bit. We’ll keep our eye on this progress.

During these times, more than ever, experience counts! We’re here for you. Please let us talk with you and your friends, family and clients. Call anytime and make it a great week! – Dave

PS –a quick personal note: Our 22 year old son David Sven got engaged to Miss Liberty Baker over the weekend. Hooray! She is a fantastic young lady and they and we are very happy. The wedding is just around the corner in August taking place near her hometown of Moses Lake, WA. Did I mention that we are excited?

These days - more than ever - experience counts!

541.318.0888