Barry Habib-Mortgage Market Consultant

April 7, 2010

Last week I was at a lunch seminar where the speaker was Barry Habib.  Barry is a consultant in the mortgage industry that often gets called for interviews from Fox, CNN, NBC, CNBC plus countless others.  He is someone I value his take on where the mortgage market is heading and here are a few points from his talk:
·         Many folks thinking about a refinance or buying that next home are waiting for the rates to make their final drop to the bottom.  He asks why wait?  Do you want to get the rates as they head to the bottom or after they turn and start their way back up?
·         Funny comment about George Washington never saw rates this low.
·         Ten + years ago the going rate was at 9%
·         Wonders why many say “my CPA is, my attorney is, my doctor is” but when it comes to a loan- “I used this guy”
·         Rates are on their way up- this month marks the end of the Fed buying Mortgage Backed Securities.
·         Mortgage rates are influenced by the stock market, economic news, technical signals, inflation and treasuries
·         Worries, like I do about how the government and other agencies, when they release their reports, with the real numbers buried in the report or sending out updated numbers a week after the report hits
·         The other day the government extended the time unemployed works can file for unemployment benefits- but currently do not count those that are on this expended timeline in the unemployment numbers
He finished his talk with a story about the book the Wizard of OZ.  Have you ever hear the story that the book was about more than what it appeared?  Maybe Silver and Gold? 
Here is an excerpt from Wikipedia:
  Numerous scholars in history, political science and economics have asserted that the images and characters used by Baum and Denslow closely resembled political images that were well known in the 1890s. They argue that Baum and Denslow did not invent the Lion, Tin Man, Scarecrow, Yellow Brick Road, Silver Slippers, cyclone, monkeys, Emerald City, Munchkins (little people), Uncle Henry, passenger balloons, witches and the wizard, as these were all common themes inspired from-in the editorial cartoons of the previous decade.
Baum and Denslow built a story around them, added Dorothy, and added a series of lessons to the effect that everyone possesses the resources they need if only they had self-confidence. Positive thinking was a prevalent trend in this period, and was the conduit by which Dorothy ultimately gets herself home. Baum, a leading authority on department store window displays that depicted imaginary worlds may also have been influenced by the elaborate Christmas displays in the department store windows in major cities.


Down Payments in Today’s Real-Estate Market

February 1, 2010

 The news media has been talking lately about how difficult it is to get home loans approved these days. I think there may be some misconceptions about available loans, down payments, etc. In the ‘old days’ – last year! – lenders were offering 0 % home loans. Some would even allow you to receive 3% of the sale price as a concession. In other words, you could come to the table with very little of your own money. Several lenders offered that product on investment properties as well. It is great for a market that continues to have appreciation and home values continue to go up but we found that when home values drop and people become upside down in their mortgages it is much, much easier to just walk away from those properties.

Years ago when the only down payment option was 40 or 50% down, the Federal Housing Association came into existence. They offered a product that enabled folks to buy their own homes – a 3% down loan  insured by the government with insurance added to it. Some people call it PMI (Private Mortgage Insurance); some call it MIP (Mortgage Insurance Premium). The reason it was there was insurance in case you foreclosed on the property. Should that occur, the lender then had an amount of money to help offset foreclosure expenses. The FHA is a good loan but I think we will find that the qualifications for an FHA loan will become even more strict. An FHA style loan by design is not a risk base on your credit score like a conventional loan. In other words, you can have a lower credit score and a fair amount of bumps and bruises and still be approved for an FHA loan. Well, that was true until the credit crunch. Then many guidelines came out and now some lenders have placed a minimum credit score on an FHA-style loan. About 8 months ago they began with a 580 credit score – if you had a 580 or above credit score and met all the other criteria, you could be approved for an FHA loan. Then lenders began to change the numbers – 580 became 620 then a 640 – so it is clear that several lenders are recognizing that those with lower credit scores have a higher risk of defaulting on their loans. The lenders are trying to control or lessen their losses by structuring things credit score driven which goes against the principle of how the FHA loan program came about. There has been talk that the FHA will make a change to a 5% down payment in the future instead of 3%.

The rest of the article here


Bi-Weekly Mortgage Payment

January 25, 2010

What is all the fuss about the Bi-Weekly mortgage payment?

We have all heard of it and seen the mailer (from the bank who holds our loan): Pay a small set up fee + between .25 – $2.00 by weekly withdraw and they will cut the interest over the life of your loan.

So, here is what I found while working up some numbers for a client.

On a $114,400 loan amount paid on a 30 year schedule, the interest at the end of the loan would be $118,081.09.  Set up a bi- weekly payment plan and that drops to $95,856.64.

But have you heard the old saying  “divide your mortgage payment by 12, and add that to your mortgage each month”?  For my calculations- click here-


NEW GOOD FAITH ESTIMATE. CHANGE FOR THE BETTER?

January 11, 2010

The government decided that a one-page Good Faith Estimate (GFE) was not adequate for the home buyer. Consequently, they have done a Real Estate Settlement & Procedures Act (RESPA) reform changing the original act that became law in 1974. This reform was supposedly done to benefit consumers (for a longer explanation of RESPA click here 🙂

The concern with the original GFE was that unethical loan officers and Mortgage Brokers were not completing the form properly. Leaving off known fees which the buyer in responsible for at closing. Anyone who has purchased a home knows that the GFE rarely matches the HUD-1 settlement.

Mortgage Brokers are able to produce a GFE however they see fit. At the beginning of my career as a Mortgage Broker I created a template for each loan transaction – a beginning point, if you will. This template is only as good as the figures that are plugged into it. Figures for lender’s fees, legal fees, title fees, state fees, county fees, survey fee, insurance, etc. are always subject to change. For this reason I update my template quarterly which enables me to be as accurate as possible. I strive to make my GFE as close to the HUD-1 settlement as possible. Legally, I was not required to update the template until January 1 of 2010 when the RESPA reform took effect.

The GFE you will now see is a binding contract between a Mortgage Broker and the client. In the old days (December, 2009!) an origination charge meant the fee paid to the Mortgage Broker for originating the loan. In January 2010 for the convenience of the consumer to shop the loan, several fees were bundled together. They are now broker originator fees, all lender fees and broker processing. Those new origination charges have zero tolerance and may not differ from the final HUD-1 settlement statement. For title fees and government recording charges, the creators of this bill recognized that there might be some variance in these fees and allowed a 10% difference at closing.  If there is a change- the Mortgage Broker pays!

To sum it up, this will be a most interesting first quarter. My prediction is that you will hear a great deal more about this both from the national and local media in the next few months as the first of these loans under the new RESPA reform begin to close. Questions?


New Good Faith Estimate

January 11, 2010
 NEW GOOD FAITH ESTIMATE.  CHANGE FOR THE BETTER?

 The government decided that a one-page Good Faith Estimate (GFE) was not adequate for the home buyer. Consequently, they have done a Real Estate Settlement & Procedures Act (RESPA) reform changing the original act that became law in 1974. This reform was supposedly done to benefit consumers (for a longer explanation of RESPA click here 🙂

 The concern with the original GFE was that unethical loan officers and Mortgage Brokers were not completing the form properly. Leaving off known fees which the buyer in responsible for at closing. Anyone who has purchased a home knows that the GFE rarely matches the HUD-1 settlement.

 Mortgage Brokers are able to produce a GFE however they see fit. At the beginning of my career as a Mortgage Broker I created a template for each loan transaction – a beginning point, if you will. This template is only as good as the figures that are plugged into it. Figures for lender’s fees, legal fees, title fees, state fees, county fees, survey fee, insurance, etc. are always subject to change. For this reason I update my template quarterly which enables me to be as accurate as possible. I strive to make my GFE as close to the HUD-1 settlement as possible. Legally, I was not required to update the template until January 1 of 2010 when the RESPA reform took effect.

 The GFE you will now see is a binding contract between a Mortgage Broker and the client. In the old days (December, 2009!) an origination charge meant the fee paid to the Mortgage Broker for originating the loan. In January 2010 for the convenience of the consumer to shop the loan, several fees were bundled together. They are now broker originator fees, all lender fees and broker processing. Those new origination charges have zero tolerance and may not differ from the final HUD-1 settlement statement. For title fees and government recording charges, the creators of this bill recognized that there might be some variance in these fees and allowed a 10% difference at closing.  If there is a change- the Mortgage Broker pays!

 To sum it up, this will be a most interesting first quarter. My prediction is that you will hear a great deal more about this both from the national and local media in the next few months as the first of these loans under the new RESPA reform begin to close. Questions?


Steve Harney, feature speaker

October 12, 2009

Last week I was able to attend a seminar featuring Steve Harney, one of the leading experts in the real estate industry. I was invited by one of my good friends – Sammy Garner. Sammy and I are in the same industry and have been friends for years. He was kind enough to not only invite me but to provide my ticket because he knew there would be information of value for us both. A secondary benefit of the seminar was the opportunity to sit at the table with a Plano real estate legend – Mike Brodie of Keller Williams. Mike is not only a speaker and seminar presenter on real estate issues; he is also one of the best producing realtors in the North Texas market. According to Mr. Harney, in 10 years there will be people sitting down and talking about the market of 2009…saying that ‘I could have done it….I should have done it’…talking about ‘if I had bought that house’….Basically he’s saying that prices are at their low and at some point they will begin to head back up, maybe not tomorrow, but pretty soon. He believes that there are many properties that are very distressed and that now is one of those times that people should buy so that in ten years they can be looking at the investment that they made instead of a missed opportunity. He said that in six months agents will be looking back at the help they had in selling houses from the tax break the government has given and from the low interest rates. It is an unbelievable time to be in real-estate and the agents in the business today should see an unbelievable year. In discussing foreclosures, Mr. Harney said that 20% of Texas homeowners’ value is under water. In other words, one in five Texans’ home value is below their mortgage amount. The percentage is even worse nationwide: in 35% of occupied homes the mortgage is now greater than the value. He spoke at length about foreclosures and said that he has found that 25% of the homes that have gone into foreclosure have been strategic foreclosures. In other words, these are people who have made their mortgage payments without a hitch for years but have recognized that they are now so upside down in their property that it becomes a good business decision to allow it to go into foreclosure. His studies are showing that the higher the person’s FICO score is, the more likely that they will make such a strategic move. Mr. Harney’s advice for Realtors was that they should strive to be the ‘expert’ in their market and be able to answer the questions about foreclosure, short sales, etc. Although it will be a challenge to predict the future of real estate, it is important for them to be the people with all the answers. Steve’s view is that Realtors and the housing industry will have the largest impact on the economy for 2010, let’s hope he is right!


Where Do I Sign?

September 14, 2009

I am a member of a trade group called National Association of Mortgage Brokers (NAMB).  It is an association, like every industry has, that helps to keep the playing field correct and competitive in this market, at least that is my explanation for them.  Recently, laws changed on how appraisals can be ordered for residential home loans.  Something called the Home Valuation Code of Conduct (HVCC) was introduced a bit ago- just a horrible idea and plan.  And it is costing homeowners Billions.  This link takes you to a page that has more detail and a petition provided by the NAMB, if once you realize the negative with this new legislation and want to help us make a change, then please sign!