Joe's Blog

Declining Markets

Joe Kupiszewski (Century 21 Mortgage) — Fri, 11 Jul 2008 04:15:48 -0700

Fannie Mae recently revised their declining markets policy. In a nutshell, their terms are: Maximum 97% Loan to Value (LTV) on conventional/conforming loans regardless of the market with their proprietary Desktop Underwriter (DU)/Automated Approval, and 95% LTV maximum financing if the loan is underwritten outside of DU (manually). You can see this here: Download the latest word on Fannie Mae's declining market policy The issue is that while this is their latest word, it is not the last word. One of the underlying issues that consumers don't understand is that when you take out a loan with a loan-to-value greater than 80%, in general, you will be required to pay some sort of mortgage insurance. Why is that important? Because, the mortgage insurance companies are the front-line losers when these loans go south. So, many of the mortgage insurance companies have their own UNIQUE guidelines. Further, they are not providing a grandfather period. So, their guidelines are varied and dynamic and this puts a very high burden on all lenders. If a lender makes a loan at 97% but cannot get mortgage insurance b/c of a change in guidelines they are very likely going to lose a large sum of money and in many instances this is too large a price to pay from a risk/reward scenario and your loan may not close. My final tidbit of advice or commentary is the following - if you have 10% or less to put down as a downpayment, I would strongly recommend looking at an FHA loan as opposed to conventional (Fannie Mae/Freddi Mac) loan. I believe in many instances, the overall cost will be less on a monthly basis and your risk of not closing will be all but eliminated. As always, I'm very curious what everyone else has been hearing, seeing, and experiencing. Regards, Joe...

Florida Property Taxes and Amendment 1

Joe Kupiszewski (Century 21 Mortgage) — Mon, 18 Feb 2008 00:43:56 -0800

Saw some great articles this weekend talking about the recently passed property tax amendment. I also happened to move this past year so I was doubly interested in finding out what was REALLY going on. It seems as if most property appraiser web sites have some good information regarding the recent amendment. I found the one from the Leon County Property Appraiser site to be particularly helpful. You can find it here: Leon County Property Appraiser - Portability. While I am not certain that this amendment fixes much of anything, there are some benefits to be had. For those of us in the business it is critical to know how this can help.First, it can help if you are currently homesteaded. For Leon County you are probably going to save $273 per year, on average (provided they don't raise taxes to offset this). For those who are going to move, the savings could be VERY significant. If you have lived in your current homestead for more than a handful of years and are planning on moving to another homestead, you are eligible to take up to $500,000 of your Save Our Homes (SOH) exemption with you. Depending on the taxes in your county and how long you have owned your home, the saving can be VERY significant!

Talk about great rates...

Joe Kupiszewski (Century 21 Mortgage) — Mon, 21 Jan 2008 07:29:02 -0800

Wow,I know my last blog touched on low rates, but I wanted to get some real numbers behind it. Looking historically at Freddie Mac's PMMS (Primary Mortgage Market Survey) Data -- PMMS Data -- we are seeing the best loan rates in nearly 3 years. Only twice in 2005 was the monthly survey data lower than it was last week - and not by much. Here is a look at the last two years and the current rate as of last Friday, January 17th, 2008.Look at the red BOX on the bottom left a little lower than halfway between 5.8% and 5.6%. Actually, it was sitting at 5.69% last Friday. In real terms lets say you were buying an average house in the Tallahassee Real Estate market - $220,000. Let's say you got a decent interest rate of 6.5%. This would make your principle and interest payment $1,390 per month. IF you wanted that same payment today, you could buy a $240,000 house and have ALMOST the same exact payment. Alternatively, you could buy the same $220,000 house for a principle and interest payment of $1,275 per month.So, if someone asks you if now is a good time to buy a house, the facts say it is more affordable than it has been for the past two years. Couple these great rates with ample selection and motivated sellers and one can certainly see some advantages to buying now.

Rates at a two year low. Where will they go from here?

Joe Kupiszewski (Century 21 Mortgage) — Wed, 16 Jan 2008 07:55:01 -0800

Rates are lower than they have been for almost two years. A question I hear a lot from borrowers and Realtors is, "where will they go from here?". While I do not claim to have a crystal ball, it seems to be a given that they will not go any higher and could possibly continue to go down in the near future. The Fed will meet again on January 29th. It is widely speculated that they will again lower the Fed's benchmark lending rate.So, what does this mean to you? If the Fed lowers its rate again, that will have a direct impact on anyone who has a home equity loan or line of credit that is tied to the prime rate. It will also lower the rate you pay on your credit cards. On the mortgage side it will have the quickest and most dramatic impact on adjustable rates. With 3-Year adjustable mortgages nearing 5%, we could see those in the 4's after the next Fed meeting. The 30-Year fixed rates are solidly in the 5's and seem to be inching lower on a daily basis. So - tell me where you think rates are going and if you dare, why!

Where, oh where, has my credit gone? 5 BIGGEST CREDIT MISTAKES

Joe Kupiszewski (Century 21 Mortgage) — Fri, 07 Sep 2007 15:43:09 -0700

I talk with people daily about working on their credit. It's funny that many of the people who send people to me for advice end up asking me for advice as well. While I do not know everything, there are some common mistakes and misconceptions running rampant around the world of credit:"That's not my account, I just co-signed for my insert favorite family member here, they did it."While on the surface this sounds great and probably earns you points for being a nice person, it can have devastating effects on your credit and your ability to get a loan. First, IFthe person you got the account for is making payments, than after time, this account will have a positive impact on your credit score. If not, well, it will not be fun for your credit score. The OTHER thing people often ignore is the possible impact on your debt-to-income ratio this can have. While, given enough time, you can POSSIBLY illustrate to the lender that this account is someone else's responsibility, you should be forewarned that it may be counted as an debt in your debt-to-income ratio and could impact your ability to qualify for a loan and the rate that you get on your loan."Ok, I cleaned up and closed all those old accounts!"At first this doesn't sound like a bad idea. And in some instances it may not be. However, a significant portion of your credit is based on your credit history. Depending on your overall credit profile, closing accounts can significantly shorten your credit history. Obviously creditors and just as importantly the credit modeling systems want to see a long history."But if I check my credit, it will lower my score, right?"I guess we need to know what your definition of "check" is. If YOU check your credit, that is considered a consumer inquiry and has NO impact on your score and does not show up in your history of inquiries on your report. However, if you credit shop this can negatively impact your score. While no one knows for sure, the credit reporting agencies tell you that like inquiries within the same 30 day period will only count as one. Meaning, if you go to Honda, Toyota and Ford to shop for a car all within the same week or two and each of these companies pulls your credit, that will only count as one inquiry. Historically speaking this was not always the case."I'll just pay those debts off and my credit will jump a 100 points, right?"Not exactly. While having a good balance of debt to credit (ideally less than 25% of revolving credit - aka credit cards) is good, it won't necessarily give you a needed boost in credit score. Your credit is made of many different components and this is only one of them. This will not make up for other issues on your credit profile."I'll pay what I owe and get those old accounts removed!"Not so fast my friend. While in the long run paying off accounts that you owe on will improve your credit, your past creditors are in no way obligated to remove the accounts. Your accounts are a snap shot in time. If you had a collection 2 years ago, even if you pay it, it was still an unpaid collection 2 years ago. It MAY be possible to negotiate having this removed, but get everything in writing. Also, if a creditor SAYS"Just send us $500 on that account you owe $1000 and everything will be good", make sure you do two things. First, get them to send you that in writing. Second, don't send them a personal check. Use a cashiers check or money order. I've seen where creditors have gone into peoples account and taken the rest of the money they are owed. It is sad, but true. Bottom line is, you owe it, they want it and if it's not in writing, it does not matter! Collections, charge-offs and bankruptcies can stay on your record for 7-10 years.So, where does that really leave us? In the end, your credit is much like your health. Moderation is the key. Have several active accounts, but none that are abused (late payments, over or near your limits or collections). Following this credit in moderation for an extended period of time will result in good credit. Don't ever give up. Just as a few bad months or a bad year can really sink you, in most cases you can recover just as quickly.

Mortgage Market - The Panic of 2007... EXPLAINED!

Joe Kupiszewski (Century 21 Mortgage) — Wed, 22 Aug 2007 07:50:23 -0700

I was just forwarded this article by my financial adviser. At first I was hesitant to open. Much of what they send out is canned and just a CYA thing. However, this link proved to be dramatically different. It is not only insightful, but (believe it or not) gives a nice basic introduction to some of the things going on. While it gives you enough acronyms to choke on, it also tries to explain and categorize them. Not sure if I've been reading this stuff too much, but this seems to clearly walk you through many of the technical aspects of what is going on w/o requiring you to get a Ph.D in Economics. I found the link to MIT on page 3 did not work, but was able to track down what I believe is the chapter he is referring you to (warning, THAT may require some post graduate study to stomach :).So, without further adieu, please read and comment on the following:John Mauldin's "The Panic of 2007!"And another link to MIT referenced on page 3:MIT - Chapter 20 - Introduction to Commercial Mortgage Backed SecuritiesLet me know if either link is broken. I thought that his article was a great read and really puts together what could actually be happening.

A brief relection on the Sub-Prime Market...

Joe Kupiszewski (Century 21 Mortgage) — Fri, 17 Aug 2007 02:32:08 -0700

I've gotten numerous questions on the sub-prime market. Is it still there? Can someone with a 550 credit score still get a loan?When I am asked if someone with sub-prime credit can still get a loan, my answer is YES. The REAL question is can someone get a loan that is GOOD for them and fits their NEEDS.With regards to whether it is good for them I reflect back on some of my recent readings on historical rates in the sub-prime market. Just over two years ago you could get a loan under 8% and some under 7% with a 500 credit score! Well, I'd like to say that those rates were still available, but in the sub-prime world, they just aren't. Now, you need a minimum of 520 and the starting rate is double-digits... typically NOT a GOOD loan for your borrower.Two things are happening in the sub-prime world (apart from the obvious closing of doors by many in the market). Rates are changing and guidelines are changing. Up until recently the rate increase was tracking closely with the rest of the market. When rates on regular (conventional, conforming, A-paper) loans went up, so did sub-prime rates. When those same rates went down, sub-prime followed. Now, however, rates have currently and dramatically begun to rise b/c the secondary markets and investors have lost their appetite for these type of loans. In a nut-shell -- every so often lenders and banks sell their loans to replenish their source of money to lend to borrowers. Well, if no one will buy them, there is no more money to lend (kind of over simplified, but you get the idea). Well, how do you get people to buy them? Give them a better price -- meaning raise the rates charged to the borrower so that the people with the actual money are willing to risk lending them money! Below is a snapshot of how the mortgage market functions from loan origination to who is actually investing:Source: DiPasquale and Wheaton, Urban Economics and Real Estate Markets. Prentice-Hall, 1996.Second, the guidelines are tightening. Basically if your credit score was X and you get get Y% Loan-To-Value, you now need to have a credit score of X+20 and you can only get Y-10% LTV. Other guidelines relate to the type of income and asset documentation you provide. Historically and still today, most sub-prime lenders do not require you to document the source of your assets. However, most allowed for very high loan-to-values with a stated income. From an objective and analytical standpoint, it is fairly easy to see why sub-prime loans were a much higher-risk. When developing a credit profile of a potential customer, underwriters look at the credit score, your income and your assets. Any of these factors can help or hurt your overall profile. In the sub-prime world, the credit score is typically bad. So, when you combine that with no proof of income (stated income) and no need to prove assets (stated assets) you can easily see why there MAY be some issues down the road. The final nail in the proverbial coffin is/was that most sub-prime loans are 2/28's. This means they are fixed for 2 years then adjustable for the remainder of the amortization period (2+28=30). So, if you got a loan in 2005 that was attractive and affordable -- it is not that way any more. And, if you have not improved your credit/income/asset position, well -- can anyone say foreclosure?Please feel free to comment on the past and your feelings of the future of the sub-prime industry.

Alt-A -- What is it, and does it still exist?

Joe Kupiszewski (Century 21 Mortgage) — Mon, 13 Aug 2007 22:42:55 -0700

If you ask 5 different mortgage persons what they are, you are likely to get 5 different answers. However, most will probably be pretty close, just a bit different perspective. According to investopedia:http://www.investopedia.com/terms/a/alt-a.asp "A classification of mortgages where the risk profile falls between prime and subprime. The borrowers behind these mortgages will typically have clean credit histories, but the mortgage itself will generally have some issues that increase its risk profile. These issues include higher loan-to-value and debt-to-income ratios or inadequate documentation of the borrower's income."As real estate professionals or consumers using the services of a real estate professional you will be exposed to an onslaught of acronyms. The Alt-A -- or Alternative A-Paper (also known as prime and conforming) mortgage type is not lacking. Falling in the middle of the three general categories (oh, don't forget the government categories FHA and VA :), these are famous for their acronyms which bleed over to the Prime and sub-prime arena as well:SIVA -- Stated Income, Verified Assets -- also known as "Stated" Your income is stated, your job (not income) is verified and so are your assetsSISA -- Stated Income, Stated Assets Both your income and assets are stated, but not verified, job is verifiedNIVA -- No Income, Verified Assets No job verification but assets are verifiedNINA -- No Income, No Assets Neither your job nor your assets are verified (can't understand why this caused a problem in the mortgage market :)No Ratio -- No Ratio Your Debt-To-Income Ratio is not taken into considerationNo Doc-- No Documentation (clever with that one) They don't care anything about, job or assets, just credit scoreAll of the above are credit score driven and were as investopedia said these mortgages were typically given to clients with clean credit histories.Many, many lenders have temporarily or permanently shut down these type of loan programs and others were put out of business b/c of their use. We still have a few brave lenders out there willing to fund these loans. Since the secondary market (where lenders and bank sell these loans and replenish their funds) lost their appetite for these, the rates have begun to climb dramatically. Only time will tell whether these loans will come back. I believe they will, but we are not likely to see the near Prime rates that we once had.The virtues, or lack thereof, of these programs can be discussed 'til the cows come home. Feel free to comment, but I hope this provides a little introduction as to what these products were/are.

NEW GUIDELINES!!!! - Good Laugh if you need one!

Joe Kupiszewski (Century 21 Mortgage) — Mon, 13 Aug 2007 09:11:31 -0700

DISCLAIMER: I can't take credit for this, but it had no author. It was forwarded to me by another mortgage broker who got it from their processor. If someone knows the author, please let me know as I would love to thank them for the laugh and give them credit. Dear Po-dunk Mortgage Broker, Very Important - Guideline Changes Effective August 13th, 2007All borrowers must have one blue eye and one brown eye to qualifyLTV > 65% SIVA requires a minimum credit score of 849For all LTV > 65%, 360 months of payment reserves now requiredBorrower's must have no previous bankruptcies in their family history going back three generationsA minimum of 25 years self-employment history now required for all NIV Programs (at same location)Minimum Credit Score for Sub-prime loans raised to 720All non-arm's length transaction borrowers (mortgage, real estate professionals, family members) will be required provide full-documentation, subject to criminal background checks, wire tapping, strip-searches, and a minimum of 12 hours of interrogation with the Department of Homeland SecurityPlease note that these changes will go into effect within the next five minutes. So, lock your existing loans immediately. All existing loans in your pipeline must fund by noon tomorrow.We apologize for the inconvenience. We realize these are tough time in the mortgage industry for all of us. Be assured that we are committed to remaining strong and we will be able to weather the storm. We ask for your understanding and cooperation.Sincerely,Management BIG MONEY LENDER

Lender and Lender guidlines update... trend or anomaly?

Joe Kupiszewski (Century 21 Mortgage) — Fri, 10 Aug 2007 05:11:21 -0700

Will it ever stop? Just got an e-mail forwarded to me from my branch manager. CitiMortgage just sent out some announcements. Nothing too out of the ordinary:Discontinued Programs:Alt-A Non-Agency NINA (No Income, No Assets) NIVA (No Income, Verified Assets)SISA restricted to primary residence and limited LTVMost of the changes were following suit to what everyone else was going - which was eliminating or dramatically modifying their Alt-A product line. Further, the pricing on Alt-A loans has just been horrible.However, the thing that really stuck out in my mind was that they were adding 100 basis points to the Home Possible Mortgage. Basically anything outside of their conforming product line was jumping significantly higher in pricing.Anyone else seeing similar comments? I'm assuming this trend will be to most lenders using these product types, but some of my account executives are better than others at keeping me up to speed.

How many lenders have you lost?

Joe Kupiszewski (Century 21 Mortgage) — Thu, 09 Aug 2007 04:28:50 -0700

You have been hearing it for the past 9 months. See www.ml-implode.comfor a running tally of which lenders are sunk, which are sinking and which are looking for a tub boat to pull them into shore. Until recently, this probably hasn't affected you or your borrowers. However, with the sudden collapse of American Home Mortgage and others completely shutting down product lines, the next few weeks and months will be interesting to say the least.In a recent poll conducted by the National Assosciationg of Mortgage Brokers they found that over 40% of respondents had lost 6 or more lenders. On a more upbeat note French bank BNP Paribas - the largest bank in France - froze about 2.2 Billion dollars worth of funds. This is upbeat, b/c the number one reason behind the funds loss in value was due to investors pulling funds out - not due to the underlying makeup of the fund. I interpret this to mean that, there was no need for investors to pull money out, they were just panicking a bit, but I could be wrong. Other commentary and details on this can be found at http://www.mortgagemarketingguide.com- Barry Habib and from Reuters on CNNMoney.comHey - are we having fun yet?

10 Things that won't add value to your house... or is it really 1 thing?

Joe Kupiszewski (Century 21 Mortgage) — Thu, 09 Aug 2007 02:38:27 -0700

You always read/hear about the things that DO add value to your house - standard stuff - upgraded kitchens, bathrooms, etc. I found it interesting to read the stories and lists of things that people consider important or more appropriately unimportant when determining value detractors in your home.The lists out there are almost identical:Roof - need a roof in good working orderPaint - neutral paint inside - not in need of painting outsideCurb appeal - In today's market, if it doesn't look nice, many people won't get out of the carEnvironmental hazards - lead paint, other hazardsEtc...The list really goes on and on. I think that there is really only one or two general things that almost all of these items on any list fall under. A broad, but accurate category is general maintenance - whether this is the exterior landscaping (both front and backyard), roof, paint or interior list of "honey-do-this", the impact on a potential buyers mentality is the same, especially if the buyer is a first-time-home-buyer. The psychological impact of having a general lack of maintenance is overwhelming to many potential buyers. Do yourself a favor. Make sure your sellers are fixing the things that need fixing. Locks that don't work, appliances that are older than the buyers, paint peeling, overgrown yard, to name a few. These are just a small fraction of the items that, if possible, should be done BEFORE any potential buyers see the house.

What is going on with the market?

Joe Kupiszewski (Century 21 Mortgage) — Tue, 07 Aug 2007 02:38:56 -0700

Could not stand by any longer on this topic. Too many things going on in the market. While generic questions will always be asked and need to be answered, there are some very dynamic changes happening in today's mortgage market. One rant that hit the national scene last week was CNBC's Jim Cramer:http://www.youtube.com/watch?v=GKZgfrsItmwNot sure if it was a publicity stunt or if he forgot to take his Xanex last Friday (August 3rd, 2007)An interesting counter point to this can be read here:http://finance.yahoo.com/expert/article/yourlife/41148I prefer the calmer, more optimistic and analytical approach, but hey, the folks at Bear Stearns are not calling me on my commute home to cry on my shoulder!These are two engaging, energetic and seemingly intelligent individuals (most of the time) that appear to be giving their best and most heartfelt opinion. They also happen to be on opposite sides of the yard in this instance and I think it shows an interesting cross-section of where we are at. I will be interested to review their comments and thoughts in the coming months and years. Please feel free to weigh in your opinions on where we are headed!

Mortgage Market Update

Joe Kupiszewski (Century 21 Mortgage) — Thu, 02 Aug 2007 09:02:23 -0700

Wow! That is about all I can say about the recent happenings in our industry. Just a few short years ago, if you had a pulse and could get a contract on a property - you could get a loan.One of my favorite sites to watch the imploding mortgage market is the following:http://www.ml-implode.comFor the last part of 2006 and the first 6 months of this year events, rumors and speculation largely surrounded the sub-prime mortgage market, and deservedly so. With over 10 lenders a month reducing, shutting down or abandoning operations it was obvious this side of the industry was beginning to get ill. However, if you haven't been watching, recent events have begun to impact lenders once thought immune to or above the problems. Most notably American Home Mortgage has ceased funding loans b/c creditors cut off credit lines. Other lenders that were not considered sub-prime lenders but heavily involved in the alt-a market are also showing signs of trouble. Here is some information I have received today:Wachovia: "Good Morning. We have just been informed that we are temporarily suspending accepting new loan registrations and/or locks on our Alt-A suite of products."UBS:"Dear Valued Client,Over the course of the last several days, severe movements within the secondary market have resulted in the imposition of a variety of restrictions on Alternative A product. In particular, liquidity in support of lower documentation loans has been greatly limited. As a result, UBS Home Finance has elected to eliminate the Stated Income/Stated Asset, No Ratio, and No Documentation options on our Advantage, One Loan, Hybrid Option Arm, and Monthly Option Arm products. "These are just snippets from two of my account executives who actively e-mail me. No telling how many more are getting ready to make similar or more dramatic adjustments.I will do my best not to further unfounded rumors, but will also pass along news on my blog as it comes in. As a correspondent lender we are authorized by 100's of lenders from all walks, so I'm confident these will not be the only ones in the coming days and months to send e-mails of dramatic changes and worse.

I have good credit, right?

Joe Kupiszewski (Century 21 Mortgage) — Thu, 02 Aug 2007 06:56:26 -0700

What is "good" credit?Good credit is somewhat relative and not as easy to pin down as one may assume. The following are some rules of thumb you can use when analyzing your credit. Obviously score is one important aspect of good credit. Score wise anything above a 720 is EXCELLENT. 720-680 is GOOD. 620-680 is OK. SUB-PAR is under 620. Under 620 there are probably issues that need to be addressed. Keep in mind, I have seen scores over 720 that have had a bankruptcy in the past 7 years. I've also seen sub-par scores with only a few blemishes.The other things to look at when analyzing your or someone else's credit are the following three areas. The first are your normal accounts, or "trade-lines" in credit speak. These are credit cards, mortgages, or other installment loans that you have never had any problems with. The second area - sometimes referred to as derogatory credit, are trade-lines where you have missed or been late one or more times. Collections are often in this category as well. Finally there are public records. The public records are normally bankruptcies, tax liens or other judgements. So, we still haven't answered what good credit is. The combination of your score AND what is actually on your credit report will determine objectively (from a lenders perspective) your willingness to pay your debts.Again, there are no 100% fail-safe rules to follow to determine whether you or your customers have the credit they need to qualify. There are many programs out there that will take into account your most recent 12 months credit history and ignore some past transgressions. Consult with a trusted mortgage consultant to find out whether or not you have "good" credit.