Tom Marshman's Blog

6/19 Update - HERA and Taxes

Tom Marshman (Secure Financial Center) — Fri, 19 Jun 2009 10:45:22 -0700

Good Morning,

Obligatory rate quote: conventional, conforming, baseline 30 year fixed is 5.5% (this is before any adjusters); 6% FHA.

With that out of the way, on to the “fun” stuff. Remember HERA? It’s not the Greek goddess in golden slippers by any stretch. Potentially more like Roz on Monsters Inc., without the charm. It’s the Housing and Economic Recovery Act of 2008 and the new disclosure timeline requirements hit the streets on 7/30. These new timelines will determine earliest possible close date based on disclosure date if the APR increases by .125% from the initial disclosure. That was a mouthful. There is an assumed three day mailing period and then a three day review period. (There are a couple of other changes, but timing will be the biggest impact to deals.)

So, say at the last minute someone decides to buy down their rate? On a $200,000 loan, an increase in fees of 1.125% will trigger a redisclosure and delay closing. Why the Act chose APR, a very misunderstood, rarely accurate, and easily manipulated number, I don’t know. In fact, most legislators couldn’t tell you what APR is – the total fees by broker and lender, plus prepaid interest, and private mortgage insurance, other fees like admin, processing, attorney, fax, document – added to the loan amount, amortized, and expressed as a percentage rate. It’s always higher than loan rate and does not effect your monthly payment.

I rarely send attachments in these updates, but there is also a new good faith estimate on the horizon for early 2010, just six months away. I take my clients line by line with the current GFE, but for those loan officers that don’t, this new format will help borrowers understand what is what. I like the old one-pager for simplicity, but it can be confusing without being decoded.

Taxes. New assessed values arrived in mailboxes, which leads to the burning question – what will my property taxes be next year? Here is an answer from the Sno. Cty. Assessor’s Web site:

Q: How much will my taxes increase or decrease in

2010?

A: Information on how much you will pay in property

taxes next year won’t be available until the taxing

districts adopt their budgets at the end of this year and

any voter approved taxes are added or dropped in 2009.

(Voter approved measures typically account for 40

to 45% of the taxes levied each year countywide.) In

early 2010 levy rates will be calculated and tax

statements will be available. New tax amounts are

usually available from the County Treasurer’s office in

February of each year.

You can also do a little math: Value/1000 = A A x Levy Rate = Taxes.

Have a great weekend,

Tom Marshman
Residential Finance
#510-LO-32121
tom@viewpointlending.net
360-530-7998

Go Local! Founding Member

of The Lake Stevens Business Network

http://lakestevensbusinessnetwork.com/

Wall Street Got a Bail Out - Now It's Main Street's Turn

Tom Marshman (Secure Financial Center) — Fri, 19 Sep 2008 08:41:53 -0700

The Market is loving the fact that the government is willing to take the bad debt off of balance sheets. Now how about the homeowners? Here's my pie in the sky solution:

Create an "underwater" loan through FHA. The loan term should be extended to alleviate payment stress - say 40 to 50 years - limited or no cash out, no second liens later, available to current home owners only, allow high debt to income ratios, fixed rate, and low FICO scores.

Sounds like a loser loan for the lender, so let's sweeten the pot. Most people would prefer to keep their homes and real estate will begin to increase in value again, so here's the sweet part for these government backed loans: draft the Note and with full disclosure to the borrower, allow the government/lender to get a percentage of the equity of the home when it sold later.

I literally have a file drawer full of stressed out candidates for these loans.

Now that Wall street has gotten the help it needed, it's time to help out Main Street.

Upside Down or Underwater Homeowners May Get Some Help!

Tom Marshman (Secure Financial Center) — Fri, 09 May 2008 21:12:14 -0700

Saw this in the WSJ today:

Fannie to Aid Underwater Loans

By JAMES R. HAGERTY
May 10, 2008

Fannie Mae is preparing to introduce by midyear a program of refinancing mortgages for people who owe more than the current value of their homes, a situation known as being "underwater."

The plan is the latest twist in efforts to contain the surge in foreclosures on homes in much of the U.S. It differs from a bill approved by the House on Thursday that would authorize the Federal Housing Administration to insure loans for distressed borrowers only after the lender has written down the principal -- something many lenders are reluctant to do. Fannie's refinance plan would result in new loans of equivalent size, leaving the borrower underwater but giving him or her a lower monthly payment or at least a fixed rate.

Officials of Fannie, a government-sponsored provider of funding for home loans, said the new program is limited to people who have kept up on their payments so far and whose loans are owned or guaranteed by the company. Normally, it is impossible for underwater borrowers to qualify for refinancing because the collateral isn't worth enough to support new loans that would let them fully pay off the old ones. But Fannie officials say in some cases it can make sense to refinance such people if the new loan will reduce their interest rate or let them lock into a fixed rate rather than risking future upward adjustments.

"We're saying to the consumer, 'You're not trapped any more,'" said Jeff Hayward, a senior vice president at Fannie.

The program will allow refinancing loans of as much as 120% of the property value. Fannie officials project that 150,000 households could qualify for such refinancings.

Rather than reducing the principal due on the loan and taking an immediate loss, Fannie is betting that these people will be able to keep up on their new loans and prices will recover.

The National Association of Home Builders and the National Association of Realtors praised the program, and many politicians have been pushing Fannie and rival Freddie Mac to do more to help borrowers.

The companies want to avoid immediate loan losses that would further erode their meager capital cushions.

Rates are Staying Eerily High...

Tom Marshman (Secure Financial Center) — Mon, 10 Mar 2008 10:01:41 -0700

When the 10 year Treasury was last at this level, I locked a cashout refi at 5.75%, the score wasn't so great, and it still paid .375% back. Same scenario is at 6.25% today.

My guess? Lenders are padding for the next wave of write downs. Not fun for anyone involved.

Zero Down? Really?

Tom Marshman (Secure Financial Center) — Fri, 11 Jan 2008 17:05:44 -0800

There are times when being labeled a "0" is okay. The programs are still out there, sure, some have income and seller concession limits, but I've still been able to get approvals and deals done with fair scores.

Often borrowers are surprised, given the bad news drum that keeps getting beat, that they can still get in a place at a decent rate with nothing down. There is the occasional confusion between a down payment versus closing costs/prepaids, but once we clear that up with a GFE for illustrative purposes, they're off the races!

This year is off to an exciting start, and I hope the same is true for the rest of the Activerain community!

Pedigree

Tom Marshman (Secure Financial Center) — Tue, 20 Nov 2007 21:07:15 -0800

"Well, I know the loan officer on this GFE, and he used to pump gas and, tah-dah, now he's a loan officer. Oh, and his boss? He used to wait tables for crying out loud!"

There are positive and the not-so-positive ways of differentiating one's self in the market. One thing I will not do when competing for work is bring up who used to do what previously. (Sure, there's limits - crash test dummy, felon, pot dealer - there's a tipping point, right?)

Point is, most originators I meet are entrepreneurial in nature, generating colorful backgrounds and histories. I respect that, and creating an originator pedigree test for all others to fail in an attempt to win over a borrower is not in my business model for the simple command to treat others as I would like to be treated.

Not to mention the sweet irony of someone whose ancesters, marshmen, harvested reeds to roof Welsh and English homes for generations becoming a loan officer!

Making Every Dollar Count!

Tom Marshman (Secure Financial Center) — Thu, 08 Nov 2007 08:53:44 -0800

The real-money benefit of a flat fee!

Check this out:

$300,000 loan amount

Industry starndard is 1% origination = $3000; 6% pays .305% rebate of $915 kept by loan officer (many loan officers consider an 1/8 add to rate for the bigger rebate of .818 a no-brainer for them.)

$1,798 payment (or $1,822 at 6.125%)

My model is 1% or $2,000, whichever is less; 6% pays .305%, $915, is paid to client, reducing closing costs.

In this market, our clients need to put every dollar they have to work for them, and that $1,915 is real money that they would have to come up with. Sellers can benefit, too, if they are paying closing costs, because they would have more money left after the transaction!

Petition Against HR 3915...?

Tom Marshman (Secure Financial Center) — Mon, 05 Nov 2007 12:19:01 -0800

My feeling is HR 3915 is plain old bad for consumers. I went to http://www.petitiononline.com and signed the petition against it. I'd be curious if others on AR have done the same?

People Can be a Pain.

Tom Marshman (Secure Financial Center) — Thu, 01 Nov 2007 00:54:14 -0700

Golden turkey award for an agent that wasn't altogether truthful on the status of an offer, wove a tale of woes, won't return phone calls, and wasted three people's time and money. I was ready, stayed in contact with my referring agent, client was excited, too; then the rug was pulled. Nice.

Yeah, yeah, look on the bright side, happens for a reason, don't let it poison, on to the next deal. Just venting, plus unprofessional conduct irritates me.

All better now.

Goodbye and Hello

Tom Marshman (Secure Financial Center) — Mon, 29 Oct 2007 17:41:12 -0700

It always happens to someboy else, right? Last week I was the somebody else. I received a call Tuesday from the owner of the company I worked for letting me know the branch was slated to be closed - on Friday.

From a business standpoint, the closure made sense, and, in keeping with the theme of my picture, a few loan officers stayed and a few, read most, left. A commute to the other branch is not very appealing, been there, done that. I left.

I have landed at a new broker, a friend of mine, and she is allowing me to market under my own business name as an employee, plus any loan officers I recruit in, I make a little money off of their loans, as well.

All in all, I'm looking forward to this new chapter in my career; and I wish a smooth transition for anyone else faced with a similar situation.

Numbers Guy...?

Tom Marshman (Secure Financial Center) — Thu, 18 Oct 2007 16:54:23 -0700

Often during discussions with, oddly enough, someone trying to sell me something, they will use the phrase, "Well, being in the mortgage business, you're a numbers guy," then proceed to whiz through a bunch of numbers.

The dialogue in my mind as they are churning the digits is, Umm, weeellll, I'm actually not as much of a "numbers guy" as you may think.

I am really more interested in the story - where you are, how you got there, where you want to be, hopes and fears. If I don't grasp that, I can't understand the story well enough to find the right program fit and make the numbers work. My goal is that my clients live happily ever after in their story.

Network Groups

Tom Marshman (Secure Financial Center) — Thu, 11 Oct 2007 21:06:31 -0700

Not just hobnobbing at the Chamber or Rotary, but goups specifically established for business referrals - do you belong to one? A good referral goup that encourages personal and professional growth is worth its weight in gold, no matter how much the members weigh!

A 60 second commercial in a friendly group makes delivery to someone out in the real world much easier. Instead of, Uh, well, hm, I work for...then the room gets hot, bang you're ready because you've done it plenty of times.

Public speaking becomes easier, too, after performing before friendlies.

Plus, where else can you hire a sales staff for so cheap?!

Of course, if you're in my area, they don't work. Only loan officers waaay far away from me are encouraged to join.

A couple of places to seek a group out are: LeTip and BNI

Pricing Implications

Tom Marshman (Secure Financial Center) — Tue, 09 Oct 2007 21:23:47 -0700

$13,000. That's the projected number, after five years, the prospective borrower was looking at between two loan programs.

His loan officer said that was the best pricing with his credit score and scenario. I explained to the borrower that may be best pricing, but for the loan officer, not to mention setting the stage for a refi in a couple years. So, a point up front, a point on the back (undisclosed), with a little lender credit looked fine to the borrower until he knew what was really happening.

As far as I'm concerned, YSP is the borrower's. They pay a higher rate; they're entitled to benefit from it. Time for some pricing clarity in the lending industry.

One Reason I Like Being an LO - Flexibility

Tom Marshman (Secure Financial Center) — Tue, 25 Sep 2007 22:05:24 -0700

Just like my bendable friend in the picture, one of the things I love about our jobs is the flexibility. If you need to take part of a day to run a backhoe when free dirt shows up, you (usually) can! Anyone else feel this way?

The Ripple Effect

Tom Marshman (Secure Financial Center) — Mon, 24 Sep 2007 16:22:17 -0700

Unfortunately the slow-down continues to take its toll. Just heard that an office I have used in the past is consolidating offices, along with some layoffs.

I hate the uncertainty of what is going on in our industry right now...

$16,000

Tom Marshman (Secure Financial Center) — Thu, 13 Sep 2007 10:40:14 -0700

I was chatting with my appraiser yesterday about market conditions and the mortgage industry, and he shared with me that he had $16,000 in invoices that are in jeopardy of not being paid due to buyers no longer qualifying for loans.

That's 40 appraisals - 40 sales not closing with a buyer in contract. Wow...

Time Blocking

Tom Marshman (Secure Financial Center) — Thu, 16 Aug 2007 11:15:53 -0700

If you're not familiar with the concept, as I wasn't until a couple years ago, it involves putting non negotiables on your calendar (marketing calls, planning, implementation, etc.) and sticking to them in order to follow your business plan.

A great tool to focus and prioritize important tasks, as well as the intangibles, like a date night or family time. Personally I have see-sawed back and forth on how well I do this, peppering my schedule with colors, tasks, and locations, only to feel guilty when the reminder pops up while I'm doing something else.

A big shift for me happened when I was exposed to the idea of event management as opposed to time management. I can't manage time; only what I do as time passes. I'm still a long way from completeness on managing my events, but I am making progress.

Anyone have a success story they'd like to share on this?

(Although I haven't contacted them or am affiliated, I thought this site had useful blurbs of info, too: http://updesk.bizbrick.com/service/service.htm#productivity)

Price or Advice or --

Tom Marshman (Secure Financial Center) — Wed, 08 Aug 2007 19:02:20 -0700

-- how about just getting the job done?

I have often shaken my head and said, There's a market for almost anything. (Look at those battery-operated lollipop spinners!) I believe there's market of price shoppers, advice shoppers, and the I trust you, just get it done nonshoppers. However, most sales lit I've read recently drills and drills on giving advice to the consumer while providing a qaulity USP as the silver bullet, leaving price out of the question.

I have seen and had the advice game work in my profession to a degree and used a justification for high fee structuring, as well, "If I tell how them how to have an extra $1ook in 20 years for their retirement, I'm worth the mulitple points I charge." There are people pay a lot of money to do business with and trust them. Do they really know how much they paid and are paying each month for the advice? Probably not.

Then there's the reverse bidding wars, several of which I have lost, where $200 or a fraction of a fraction of a point, even after the advice, kills the deal. People can be so rate and fee focused it just doesn't matter. I have kept a client by doing a loan for free once.

The third aspect, just getting the job done is an important part of any transaction, the skeleton to hang the meat of price and advice on, in my opinion. But it doesn't come into play until someone is already in pretty far.

As I ponder this out loud, I am coming to the conclusion that each client has their own set of issues, d'uh, and my job is to figure those out, tailor my presentation and the words chosen to own those issues; then get it done.

Thoughts?

AHM Liquidity

Tom Marshman (Secure Financial Center) — Tue, 31 Jul 2007 15:41:27 -0700

Maybe "old" news for some, new to me after a lovely weekend away, making Tuesday my Monday. I was catching up on what's shaking in the market and yet another lender with issues. American Home Mortgage (ABC is a wholesale arm I've used in the past) is having liquidity issues due to margin calls. I almost went to work for them a couple of years ago. Yikes.

I just spoke with the local ABC office, and she said they were not funding today; but there are positive rumors out there that something is in the works. Rumors nonetheless.

Half Empty, Half Full, or Just Half?

Tom Marshman (Secure Financial Center) — Wed, 25 Jul 2007 13:07:46 -0700

July 2007 Broker Magazine, pg. 21, "Jumbos: Big Loans, Big Problems" A quote from Michael Covino in this article has been cycling in the back of my mind for three days. Maybe it will stay away if I let it out of my head. "We're not even at the halfway point for what's in store for us as lenders..."

Honestly, I'm feeling schizophrenic about the overall market right now. For a period it's, Dang the torpedoes, you have no control so full enthusiasm ahead; another it's a more worried concern for what's next.

Here's a torpedo, again from Covino, same page, "...but the mortgage marketplace is not in a recession. It's in a depression." Now, from what I have been able to quickly Google and Wiki, a depression is basically a long recession or decline, more than two consecutive quarters.

Out of curiosity, I went to the MBA site and checked their Market Environment page, tallying up the decrease/increase weekly reports back to Nov. of 06. There were 21 decreases, 20 increases and 1 unchanged. The quarterlies went like this:

Q3 06, down 6% from Q3 05 - remains strong overall

Q4 06, up 3% from Q4 05

Q1 07, down from Q4 06 - remains strong overall

Q2 07 wasn't on the site yet.

Curiouser and curiouser. I navigated to the Freddiemac site and came across this article: http://www.freddiemac.com/news/finance/outlooks/July_07_frecom_outlook.html

Scroll down to the last paragraph, Mortgage Activity:

"Mortgage activity. Fewer home sales, slower growth in home prices and rising interest rates that reduce refinance incentives all point to a lower estimate of mortgage activity. We now forecast total mortgage originations in 2007 to hit $2.75 trillion, down from our previous estimate of $2.79 trillion, representing an 8.5% decline from 2006 volume. The refinance share of mortgage originations is expected to hit 42% in 2007, the lowest level in seven years. Finally, mortgage debt outstanding, which rose an annualized 5.6% in the first quarter, is predicted to grow by 5.9% over 2007, the slowest growth rate in more than a decade."

I read that and thought, Gosh, overall we are in a depression. Now, the Seattle area is doing okay compared to actively declining markets. Doing okay, or "normal", in my seat o'pants analysis, means the tranny is in neutral, sometimes slipping into drive, trending slightly upward overall.

So, recession, depression, market cycle...greater minds will decide. Personally, in reconciling the local market with national trends, I'm netting out at just half. Regardless of volume, I still have an enthusiasm for how a mortage can be used as a financial tool to help my clients achieve their goals.