Jeff Rickard

     I have just spent the last few weeks fielding several calls that have started out with the phrase “last year I qualified for $300,000″ or “last year a mortgage guy said I could get a loan for $300,000″.     Well let me tell you, last year was a long time ago. 

     There is no more stated income, there are a lot less “bad” loan officers, there are no more “B” paper lenders and the concept of just saying yes and we will see what sticks is finally over.  

     The key is that these people who I have been talking to who are saying they qualified for $300,000 (a payment of about $2100/month) only made $2500 a month gross.  They NEVER “really” qualified for $300,000 but they are in total shock when I tell them they can only qualify for about $140,000. 

     You may ask how can they be that *&%$#@, but the truth is, the mortgage industry and certain Realtors not only said it was possible but actually closed the clients friends and coworkers, who made exactly what they made, on the $300,000 house.

     So what do we do now?  Start over, get the correct answers and instead of being angry about how much you qualify for be thankful that you did not buy last year!

Rates are going through the roof and the old standards of forecasting rates are no longer accurate.  What is going on?  The following is an explanation that is given by FNMA to their vendors:

The Capital Markets Sales Desk has fielded a large number of calls from customers simply asking,  “What’s going on?  Why is the mortgage market trading lower every day?”  The following are reasons that could help explain why mortgages are struggling and why current market conditions are so volatile: Continue Reading »

     Take a moment this week and click on the “Economic Notes” tab and read the article.  The Fed cuts rates to stimulate the market, mainly the stock market.  A strong stock market is a weak bond market.  If people sell their bonds to get into stocks then bond values drop.  Bond values decreasing means interest rates rising.  Everyone thinks when the Fed is cutting rates that it is cutting mortgage rates - not the same thing at all.

  The last time I reported on coming changes I was expecting some movement in early December, that seems unlikely at this time due to “holds” put on the FHA legislation by several Senators.  Their actions prevented the legislation from being on a “fast track” but it appears that at least the “holds”will be lifted this week or next. 

     Identical provisions in the House bill and the Senate bill are raising the mortgage limit floor from 48% to 65% of GSE limit ($271,000), making condo approval processing easier, increasing the maximum loan limits for reverse mortgages to $417,000 and allowing reverse mortgages to be used for home purchases.  Since it is in both bills they should approve these changes.

     Different provisions in the House and Senate bills are as follows: 

Down payment - Senate wants current 3% to be reduced to 1.5%, House wants 0% down payment or 100% financing.  Senate probably wins this one so we expect 1.5% down payment.

Mortgage limits in high cost areas,  Senate wants to raise from $308,370 to $417,000.  House wants to go to $729,000 (yeah baby!)  Senate will probably win this too but may have to go to about $500,000. 

Seller funded down payment assistance - Senate hates it, House loves it.  Too close to call.

     You have probably heard the commercials on the radio that say “pay your mortgage off faster, save 10 years”,  “do not change your spending habits and pay your mortgage off in half the time”.  These ads have generated a lot of interest and have caused my clients to call and ask “what is it all about?”  The truth is that I do not know, so I figured I better do some research.  After my research I still do not know!  This post is a new concept for me, it is based on me knowing nothing and still giving an opinion. Continue Reading »

Market events in the coming weeks will have significant impact on the prospects for any new legislation.  If there is more bad news, the odds of legislation increase.  On the FHA front, it appears to be more a question of when and not if. 

     FHA bill should be enacted around December 1st to raise the mortgage limit in “high cost” areas to $417,000.  It could be raised higher to possibly $500,000 or more if problems persist for jumbo loans.

     Mortgage insurance tax deductibility looks like it will be extended for another 7 years until 2013.

     Risk based pricing for mortgage insurance will be enacted. 

     The termination of seller funded down payment assistance was effective October 1st.  The only exception was for Nehemiah that did get a 6 month extension because of  an agreement they reached with HUD over litigation in 1999.

There is a 50/50 chance that we could see GSE conforming mortgage limits increase from $417,000 to $600,000 or $650,000.   

100% financing is still available and it comes from qualifying for State, County and City assistance, what I call “real” down payment assistance. In fact their business is booming, and unfortunately like FHA, many loan officers and Realtors have no idea how to work these programs. Why don’t they know these programs? Because for the last five years the industry used a different form of assistance. Continue Reading »

Sometimes, the best intentions ……… BACKFIRE!

Many of my clients have had to endure much unfounded stress because of misinformation about reverse mortgages. This bad information can prevent seniors, whose financial problems could be solved by obtaining a reverse mortgage, from learning more about them. In this article I am taking the opportunity to clear up some of the misconceptions I have often heard.

• At the end of the loan, the lender gets the property.

REALITY: The borrower always retains title and ownership of the property.

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The new Colorado laws that I discussed on September 1, 2007 have spawned the first of many new disclosures to come. The Colorado Tangible Net Benefit Disclosure states that it is the duty of the mortgage broker not to recommend or induce a borrower to enter into a transaction that does not have a reasonable, tangible net benefit to the borrower. All in all this is a pretty good form, it is worth a read.

The question I have is does this really protect the consumer from the mess we are in now?

The new loan will enable me to buy a home. How many people did we put in homes that really should have waited?

The proceeds of the new loan will be used for purposes that are of such importance to me that I am willing to obtain a new loan, even if that loan has terms that may not be as favorable as my existing loan. Examples include, but are not limited to: medical expenses; home improvements; avoid foreclosure; or to pay educational expenses. How about going to The Leadbetter golf academy? Of course that would be under home improvement.

You would think that the spirit of this form or the spirit of the law that created this form would keep you from going from a fixed loan to a negative amortization loan so I could get cash out to do something stupid. But the truth is if you check the appropriate boxes you can do just that.

The motivation of this post was a question asked to me by a borrower and their Realtor on Friday. Why didn’t the loan guy I was dealing with know about the option you offered me?

There appears to me to be a silver lining in all the turmoil we are seeing in the mortgage business. The reappearance of knowledge as a value. Knowledge has not really been needed in the mortgage world for several years now. If you could fog a mirror we could get you a loan, well maybe not me, but someone would do “whatever” it took to get you a loan. I do want you to know I will do “whatever” it takes to get you a loan too, except commit fraud. Unfortunately that little caveat did cost me business.

The mortgage industry not only lowered the bar for the borrower but we also lowered the bar for the loan officer. Anyone who wanted to be a loan officer or even own their own mortgage company could do so in a day, especially in Colorado where there was no real regulation until a couple months ago. These loan officers, mortgage brokers, etc. did not need any knowledge to be in the industry, if they had potential borrowers and wholesale representatives or experienced processors, they were in business.

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