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I was reading the NY Times recently and came across an interesting article. It has to do with the professionalism and knowledge of mortgage loan originators. As you might imagine, this affects my business so it piqued my attention. The ability of a loan originator to get transactions closed cuts down on headaches and frustration for buyers--and their realtors.
It seems that something called the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) was passed by Congress in July 2008 and required states to pass legislation requiring the licensure of mortgage loan originators. The SAFE Act mandated that state agencies participate in the Nationwide Mortgage Licensing System and Registry (NMLS) and that mortgage brokers meet national standards in order to obtain a license.
Testing began in summer 2009. Now that results are starting to trickle in it appears a substantial of mortgage brokers have a lot more work to do to meet standards. Some 10,000 people have taken the tests and more than 30% failed the federal portion. The number of failures on the applicable state portions was slightly less – 27%. All in all, that’s a pretty sad state of affairs.
I would like to think Arkansas’ brokers are a cut above those dismal test results. At least our area did not suffer the horrendous housing collapse that occurred in many states where many unqualified borrowers were given loans they had little ability to repay.
Nineteen states have offered the tests to date, including Arkansas where tests began November 1, 2009. So far I haven’t been able to find results specific to Arkansas.
When a buyer asks me for recommendations about the best place to obtain a mortgage, I usually refer them to few trusted people at local companies who have done a good job in the past for my clients. I don’t necessarily trust some of the on-line lenders that advertise frequently on TV. Sometimes you get a good loan originator, sometimes not.
The other thing to look for is whether you are dealing with a mortgage broker or a bank. A bank will process the loan according to its guidelines. Sometimes they keep the loan and sometimes they will sell it to another lending institution. A mortgage broker has a lot of “investors” (usually banks) to whom they will sell the loan. Some have better relationships with their investors than others and are better able to exert pressure to get problems solved and the transaction closed. Banks who regularly sell their loans also need to have such relationships, but even the experience (or lack thereof) of loan originators within their own institutions can sometimes make or break a transaction.
A proven track record speaks volumes. A good, experienced, and knowledgeable loan originator is important, and the same is true for the realtor you select.
For more information:
http://mortgage.nationwidelicensingsystem.org/safe/Pages/default.aspx
http://www.nrmlaonline.org/App_Assets/public/ef8c2414-00da-4cff-8c69-e45d2ca45a82/SAFE%20Act%20Update.pdf
http://www.nytimes.com/2009/12/27/realestate/27mort.html?
http://www.securities.arkansas.gov/page/338/mortgage-loan
Showing posts with label home mortgages. Show all posts
Showing posts with label home mortgages. Show all posts
Friday, January 22, 2010
Wednesday, December 30, 2009
Happy New Year
It's a good thing 2009 is almost over. Not a good year for a lot of people. Hopefully 2010 will bring recovery to the recession and more prosperity to all. And for all sellers out there, I hope your house sells wherever you are, so you can move to NW Arkansas and purchase a home here. ;-) Happy New Year.
Wednesday, November 05, 2008
Presidential Elections and the NW Arkansas Real Estate Market
Normally I try not to get political, but yesterday was election day and it appears that Barack Obama will be our new president starting at the end of January. It was a hard-fought campaign.
His comments last evening about hope and trying to solve the current economic dilemma of this country were very encouraging. And John McCain's speech also referred to the necessity of all of us to work together to solve the dire situation that this country confronts.
In NW Arkansas we are kind of lucky. We have some major corporations with home offices here, and when times are tough, Walmart does well. At a time when (in the nation as a whole) jobs are being lost, there are still jobs being created in NW Arkansas, although not at the accelerated pace of the past few years. And jobs bring people to our area (also those great "best places to live" articles in major magazines).
There are homes being sold here, and the real estate market is not as dire as in other parts of the country. It's actually a great time to purchase a home--lots of great values available. But if you are a seller, you need to realize that it IS a buyer's market, and there are still many homes on the market. If you are lucky enough to actually get an offer on your home, it will probably be much less than what you were hoping for--work with it. And if you have an older home, you need to be very aggressive about pricing (i.e. update it as much as possible and/or price it much lower than you ever thought you should). Prices have come down, there are lots of foreclosures on the market, and an older home is competing with new homes, which (in many cases) are being sold at cost.
My recommendation is that if you don't need to sell right now, don't. Rent your home or hang in there until the market turns around, which it will eventually. I don't have my crystal ball handy, but I'm thinking at least wait until next year. If you purchased your home at the peak of the market, you may have to wait longer to sell without losing money.
In any case, we're finally past the election campaign, and perhaps the new spirit of optimism will help the market improve and will spur the economy. Let's hope so.
His comments last evening about hope and trying to solve the current economic dilemma of this country were very encouraging. And John McCain's speech also referred to the necessity of all of us to work together to solve the dire situation that this country confronts.
In NW Arkansas we are kind of lucky. We have some major corporations with home offices here, and when times are tough, Walmart does well. At a time when (in the nation as a whole) jobs are being lost, there are still jobs being created in NW Arkansas, although not at the accelerated pace of the past few years. And jobs bring people to our area (also those great "best places to live" articles in major magazines).
There are homes being sold here, and the real estate market is not as dire as in other parts of the country. It's actually a great time to purchase a home--lots of great values available. But if you are a seller, you need to realize that it IS a buyer's market, and there are still many homes on the market. If you are lucky enough to actually get an offer on your home, it will probably be much less than what you were hoping for--work with it. And if you have an older home, you need to be very aggressive about pricing (i.e. update it as much as possible and/or price it much lower than you ever thought you should). Prices have come down, there are lots of foreclosures on the market, and an older home is competing with new homes, which (in many cases) are being sold at cost.
My recommendation is that if you don't need to sell right now, don't. Rent your home or hang in there until the market turns around, which it will eventually. I don't have my crystal ball handy, but I'm thinking at least wait until next year. If you purchased your home at the peak of the market, you may have to wait longer to sell without losing money.
In any case, we're finally past the election campaign, and perhaps the new spirit of optimism will help the market improve and will spur the economy. Let's hope so.
Wednesday, May 21, 2008
Did you know it's possible to get an Energy Efficient Mortgage?
Energy Efficient Mortgage (EEM) is one of many FHA programs that insure mortgage loans. The mortgages are actually made by many banks, savings and loan associations, and mortgage companies, and the loans are covered by EEM insurance through FHA.
The idea behind the EEM program is to help achieve national energy-efficiency goals and reduce pollution as well as to provide better housing for people who might not otherwise be able to afford it.
The program considers the anticipated savings on monthly utility bills when a buyer purchases an energy-efficient home.
For example, let’s say the utilities in an older home you are considering will cost $200 a month and you qualify for a mortgage payment of $700/month but if you buy a certified energy-efficient home instead, the utility expense will be only $100/month. Now you can qualify for an $800 monthly mortgage payment.
This is a very simplified explanation but I hope it’s sufficient to give some serious consideration to an EEM.
Other provisions of the program are geared to adding energy efficient improvements to an existing home – one you already own or one you are considering buying.
Click on the links below for more details and technical information, such as maximum amounts, who qualifies, and how to get an EEM:
http://www.arkansasbusiness.com/article.aspx?aID=104162.19830.116304&view=all
http://www.hud.gov/offices/hsg/sfh/eem/energy-r.cfm
http://www.huduser.org/periodicals/ResearchWorks/ResearchWorks_Mar06.pdf
http://www.hud.gov/offices/hsg/sfh/203k/203k--df.cfm
The idea behind the EEM program is to help achieve national energy-efficiency goals and reduce pollution as well as to provide better housing for people who might not otherwise be able to afford it.
The program considers the anticipated savings on monthly utility bills when a buyer purchases an energy-efficient home.
For example, let’s say the utilities in an older home you are considering will cost $200 a month and you qualify for a mortgage payment of $700/month but if you buy a certified energy-efficient home instead, the utility expense will be only $100/month. Now you can qualify for an $800 monthly mortgage payment.
This is a very simplified explanation but I hope it’s sufficient to give some serious consideration to an EEM.
Other provisions of the program are geared to adding energy efficient improvements to an existing home – one you already own or one you are considering buying.
Click on the links below for more details and technical information, such as maximum amounts, who qualifies, and how to get an EEM:
http://www.arkansasbusiness.com/article.aspx?aID=104162.19830.116304&view=all
http://www.hud.gov/offices/hsg/sfh/eem/energy-r.cfm
http://www.huduser.org/periodicals/ResearchWorks/ResearchWorks_Mar06.pdf
http://www.hud.gov/offices/hsg/sfh/203k/203k--df.cfm
Wednesday, March 19, 2008
The Feds Cut Rates Again – Why Doesn’t My Mortgage Rate Go Down?
The dramatic cuts in interest rates by the Federal Reserve Bank have caused many people to ask why mortgage rates are not dropping as well. It’s a legitimate question that has several answers and I’ll try to explain in simple terms…
The first, and most important, thing to understand is that the Federal Funds Rate is simply a suggested rate of interest that one bank can charge another bank for an overnight loan. At the end of each business day, banks must have certain amounts of cash on hand to meet reserve requirements as set by law. One bank may need to borrow to meet the requirements, while another bank may have surplus funds available. Banks can negotiate the actual interest rate on these overnight loans – they are not forced to charge the Fed Fund Rate.
Secondly, one has to realize that an overnight loan is extremely short-term while a 30-year fixed-rate mortgage is an extremely long-term loan. It is easy to commit funds at a certain rate for a short term but it is much more difficult to determine what the rate should be for a long term. Many factors such as anticipated economic growth and inflation rates must be taken into consideration in setting a rate of interest that would draw investors.
Now we have to take a look at U.S. Treasury Bonds. As we all know, T-Bonds are backed by the full faith and credit of the United States Government. In other words, T-Bonds are a risk-free investment. T-Bonds serve as a benchmark risk-free interest rate. Investors (you, me, professional money managers and everyone in-between) want to get the best possible return on their money based on the amount of risk involved.
Given the fact that the average length of a 30-year fixed-rate home mortgage is actually about ten years, it makes sense to compare investing in home mortgages (with risk) to 10-year fixed rate T-Bonds (no risk). The interest rate has to be higher on the mortgage securities or no one would invest in them.
As the number of foreclosures and defaults has increased (increasing risk), mortgage interest rates have had to go up in order to attract investors. This is the so-called “secondary market” for mortgages.
As many people who have purchased homes can attest, often the bank that gave the buyer the mortgage is not the bank to which buyers are making their payments. Shortly after closing, often buyers get a letter explaining that a different bank now has their mortgage. This is because the original bank sold their mortgage to another financial institution.
Many factors affect movement in mortgage rates – not the least of which is competition for money. An investor has money and a homebuyer needs to borrow money. Where can the investor get the best return?
This has been an overly simplified explanation of a very complex subject but I hope it helps at lease partially explain why changes in the Federal Funds Rate as discussed in the press have almost nothing to do with the mortgage rate.
For more information:
http://library.hsh.com:80/read_article-hsh.asp?row_id=85
The first, and most important, thing to understand is that the Federal Funds Rate is simply a suggested rate of interest that one bank can charge another bank for an overnight loan. At the end of each business day, banks must have certain amounts of cash on hand to meet reserve requirements as set by law. One bank may need to borrow to meet the requirements, while another bank may have surplus funds available. Banks can negotiate the actual interest rate on these overnight loans – they are not forced to charge the Fed Fund Rate.
Secondly, one has to realize that an overnight loan is extremely short-term while a 30-year fixed-rate mortgage is an extremely long-term loan. It is easy to commit funds at a certain rate for a short term but it is much more difficult to determine what the rate should be for a long term. Many factors such as anticipated economic growth and inflation rates must be taken into consideration in setting a rate of interest that would draw investors.
Now we have to take a look at U.S. Treasury Bonds. As we all know, T-Bonds are backed by the full faith and credit of the United States Government. In other words, T-Bonds are a risk-free investment. T-Bonds serve as a benchmark risk-free interest rate. Investors (you, me, professional money managers and everyone in-between) want to get the best possible return on their money based on the amount of risk involved.
Given the fact that the average length of a 30-year fixed-rate home mortgage is actually about ten years, it makes sense to compare investing in home mortgages (with risk) to 10-year fixed rate T-Bonds (no risk). The interest rate has to be higher on the mortgage securities or no one would invest in them.
As the number of foreclosures and defaults has increased (increasing risk), mortgage interest rates have had to go up in order to attract investors. This is the so-called “secondary market” for mortgages.
As many people who have purchased homes can attest, often the bank that gave the buyer the mortgage is not the bank to which buyers are making their payments. Shortly after closing, often buyers get a letter explaining that a different bank now has their mortgage. This is because the original bank sold their mortgage to another financial institution.
Many factors affect movement in mortgage rates – not the least of which is competition for money. An investor has money and a homebuyer needs to borrow money. Where can the investor get the best return?
This has been an overly simplified explanation of a very complex subject but I hope it helps at lease partially explain why changes in the Federal Funds Rate as discussed in the press have almost nothing to do with the mortgage rate.
For more information:
http://library.hsh.com:80/read_article-hsh.asp?row_id=85
Saturday, October 06, 2007
What’s the Mortgage Crisis All About?
That’s the question I’m being asked a lot these days. I’ll try to answer in layman’s terms.
First, most homeowners will not be directly affected by the current crisis in sub-prime mortgages. Homeowners with conventional, non-adjustable mortgages will continue making their mortgage payment and owning their home just as they always did.
Now a little history. The problems started a few years ago when lenders began making risky and expensive loans to buyers with less than desirable credit histories. Mortgages requiring no down payment or interest-only payments were given to almost anyone who asked. Some buyers were even permitted to borrow more than the current value of the home, justified by the idea that the value would surely increase.
Another practice by some predatory lenders is behind much of the current mortgage fiasco. These lenders offered extremely low “teaser” interest rates that would significantly increase at some point in the future.
The future is here! The interest rate on many of those mortgages has increased dramatically.
When a lender gives a mortgage, he in turn “bundles” that mortgage along with many others and resells them to investors. That’s common practice and it’s what’s causing jitters in the financial markets these days. Investors are nervous about recouping their costs on these risky mortgages – never mind making a profit.
The sub-prime mortgage has dried up and blown away. There are plenty of banks and mortgage companies still making fixed rate 15-30 year mortgages to credit worthy buyers. But unconventional mortgages being made to buyers with unsubstantiated income, poor work history, and poor credit are history.
Overall, this is a good thing. When things settle down, buyers will have safer, surer mortgages financing their homes.
As I said earlier, most homeowners will not be directly affected but everyone has been indirectly affected.
As buyers whose interest rates have jumped up cannot make the payments, a ripple effect sets in. That’s bad enough, but thousands more will face the same problem in the next couple of years as their interest rates reset.
When lenders foreclose and homes sit vacant, prices start to drift downward. That can affect all the houses in an area, particularly if that area had a large number of homes financed by sub-prime mortgages. When the inventory of homes for sale increases, prices dip even further.
Lenders have tightened credit standards. That translates into fewer eligible buyers, which can mean a greater supply of unsold inventory, both existing homes and new construction.
As the inventory of unsold homes increases, fewer new homes are built. Naturally, that means fewer paychecks going to construction workers and fewer purchases from wholesalers. Families have less disposable income and retail sales take a hit.
I’m sure you get the picture.
Here’s the good news. Activity in only seven states (Arizona, California, Florida, Indiana, Michigan, Nevada, and Ohio) accounts for the overall rise in delinquencies nationally.
The Federal Reserve Board recently lowered interest rates, thereby helping to stabilize financial markets.
Congress is considering revising rules that govern Fannie Mae and Freddie Mac, which buy nearly all prime mortgages under $417,000.
Treasury and HUD are looking to find ways to assist borrowers who are creditworthy, but who got caught in a pinch and are facing mortgage payments than they can no longer afford.
Best of all, do not be discouraged. There are plenty of banks and mortgage companies still making fixed rate 15-30 year mortgages to credit worthy buyers. Reputable, conservative lenders have money for mortgages to credit-worthy borrowers. Interest rates are favorable. There are lots of homes on the market; it’s a buyer’s market.
If I can help you buy a home, call me. It’s what I do full time. I would be happy to help you in these confusing times.
For more information:
http://useconomy.about.com/od/governmentagencies/p/FNMA.htm
http://useconomy.about.com/od/governmentagencies/p/FHLMC.htm
http://useconomy.about.com/od/economicindicators/tp/Subprime-Mortgage-Primer.htm
http://homefinance.nytimes.com/nyt/article/news/2007.08.21.bankrupt19/3/
http://nationalrealtynews.com/content/templates/standard.aspx?articleid=557
First, most homeowners will not be directly affected by the current crisis in sub-prime mortgages. Homeowners with conventional, non-adjustable mortgages will continue making their mortgage payment and owning their home just as they always did.
Now a little history. The problems started a few years ago when lenders began making risky and expensive loans to buyers with less than desirable credit histories. Mortgages requiring no down payment or interest-only payments were given to almost anyone who asked. Some buyers were even permitted to borrow more than the current value of the home, justified by the idea that the value would surely increase.
Another practice by some predatory lenders is behind much of the current mortgage fiasco. These lenders offered extremely low “teaser” interest rates that would significantly increase at some point in the future.
The future is here! The interest rate on many of those mortgages has increased dramatically.
When a lender gives a mortgage, he in turn “bundles” that mortgage along with many others and resells them to investors. That’s common practice and it’s what’s causing jitters in the financial markets these days. Investors are nervous about recouping their costs on these risky mortgages – never mind making a profit.
The sub-prime mortgage has dried up and blown away. There are plenty of banks and mortgage companies still making fixed rate 15-30 year mortgages to credit worthy buyers. But unconventional mortgages being made to buyers with unsubstantiated income, poor work history, and poor credit are history.
Overall, this is a good thing. When things settle down, buyers will have safer, surer mortgages financing their homes.
As I said earlier, most homeowners will not be directly affected but everyone has been indirectly affected.
As buyers whose interest rates have jumped up cannot make the payments, a ripple effect sets in. That’s bad enough, but thousands more will face the same problem in the next couple of years as their interest rates reset.
When lenders foreclose and homes sit vacant, prices start to drift downward. That can affect all the houses in an area, particularly if that area had a large number of homes financed by sub-prime mortgages. When the inventory of homes for sale increases, prices dip even further.
Lenders have tightened credit standards. That translates into fewer eligible buyers, which can mean a greater supply of unsold inventory, both existing homes and new construction.
As the inventory of unsold homes increases, fewer new homes are built. Naturally, that means fewer paychecks going to construction workers and fewer purchases from wholesalers. Families have less disposable income and retail sales take a hit.
I’m sure you get the picture.
Here’s the good news. Activity in only seven states (Arizona, California, Florida, Indiana, Michigan, Nevada, and Ohio) accounts for the overall rise in delinquencies nationally.
The Federal Reserve Board recently lowered interest rates, thereby helping to stabilize financial markets.
Congress is considering revising rules that govern Fannie Mae and Freddie Mac, which buy nearly all prime mortgages under $417,000.
Treasury and HUD are looking to find ways to assist borrowers who are creditworthy, but who got caught in a pinch and are facing mortgage payments than they can no longer afford.
Best of all, do not be discouraged. There are plenty of banks and mortgage companies still making fixed rate 15-30 year mortgages to credit worthy buyers. Reputable, conservative lenders have money for mortgages to credit-worthy borrowers. Interest rates are favorable. There are lots of homes on the market; it’s a buyer’s market.
If I can help you buy a home, call me. It’s what I do full time. I would be happy to help you in these confusing times.
For more information:
http://useconomy.about.com/od/governmentagencies/p/FNMA.htm
http://useconomy.about.com/od/governmentagencies/p/FHLMC.htm
http://useconomy.about.com/od/economicindicators/tp/Subprime-Mortgage-Primer.htm
http://homefinance.nytimes.com/nyt/article/news/2007.08.21.bankrupt19/3/
http://nationalrealtynews.com/content/templates/standard.aspx?articleid=557
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