Jeff Rickard

 What is a declining market?  It seems simple enough to explain, it is when real estate values are dropping in a market place.  Basically all of the front range currently qualifies as a declining market.  In the mortgage industry a declining market has major impact on the loans that we can do and how much you can borrow. 

     For example, if the home you want to buy is in a declining market conventional lenders require an additional 5% down payment.  So a loan program that was 100% financing now requires 5% down or basically changes it to a 5% down loan.  If you were required to put 10% down now it would require 15%.  Remember almost all the front range is considered a declining market by Fanni Mae and Freddie Mac. 

     FHA and VA has not at this time required additional down payment in declining markets but appraisals are now being heavily scrutinized.   

Two announcements this week are going to make it a little harder to get loans done for awhile. 

     The first is that Denver has been slated as a “declining market”.  What does that mean?  That means that because property values are on a decline that lenders are not going to lend to their maximum ability, they will require an extra 5% down payment.  In other words, if their standard program required 5% down, in certain parts of Denver they will require an additional 5% or 10% total.  The hard part of this is they do not give a list of “places”, some parts of Denver are fine and some are not.  You will not know for sure until appraisal.  

     The second new challenge we are facing is that Fannie Mae and Freddie Mac are instituting a “risk based” pricing model.  The lower your credit score the more it will “cost” you to get a loan.  680 FICO score and above will be fine, everything below that will incur more cost in getting a loan.  Less than 620 will require as much as 2 points in cost.  What is the bottom line?  At today’s rates you would be at 6.375% with 1 discount point,  if you had a sub 620 FICO score it would either be 6.375% with 3 discount points or 7.375% with 1 discount.  WOW!   

I was at a meeting for the Builder Realtor Council (BRC) in Denver today and they had a presentation on market data. One of the questions was rating the “trust factor” in the marketplace. The most trusted in order were title people, Realtor, real estate attorney, builder and last - mortgage lender. Not really surprised by that news, the truth is, in Colorado we probably deserved to be on the bottom. Until very recently we were an unregistered, unlicensed group. That has all changed and you can read about that in my post on new mortgage laws.

So, the good news is we are cleaning up our act but where are the bad guys going? Two answers: they are staying and just going to do the business illegally or they are heading into the commercial market. Continue Reading »

I read an interesting statistic on Mark Eskano’s blog site.  He is currently in Las Vegas at the National Association of Realtors Expo.  The statistic from NAR states that 2007 looks like it will be the 5th best year for real estate sales in the 100 year history of NAR.  That is not what you would expect if you just watched the news on TV.  To read the complete article written by Mark Eskanos of Metro Brokers  go to the link: http://www.eskyknowsdenver.com/2007/11/15/no-limits-las-vegas/

I have spent the last three months educating Realtors and the public through classes, websites, and this blog on the return of FHA. I have been telling everyone that if you are working with a loan officer or Realtor that has come into the business in the last 5 years, then most likely they’ve never done an FHA loan or had an FHA loan be part of their real estate transaction.

I have warned that if you do not know FHA in this market that you are at a competitive disadvantage. So why am I now warning you against new FHA loan officers? Because of a new FHA Alert that addresses brokers who were not FHA approved giving the impression that they are. They are giving their loans to an FHA approved ‘buddy’ who closes it and then gives a kick back to the broker. Is that the FHA “knowledgeable” lender you want to work with?

Now that is only part of the problem. The other half of this is that many brokers are moving en mass to FHA approved lenders to get jobs. Now if someone wants to move to new employers and better themselves I am more than fine with that.  What I am not fine with is that they come to work on Monday and by Tuesday they are on the street saying that they are FHA experts.

In today’s market, where the smallest hiccup is causing a deal not to close, it is imperative that you use an experienced FHA loan officer who works at a company that has experienced FHA underwriters and processors.

     Universal Lending has had a program for 8 years called Housesmart that is in the business of making mortgages and real estate an employee benefit.  It is even listed on the State of Colorado employee site as an available benefit so it does have traction.  It is very interesting how the program ebbs and flows with time and market conditions.  In other words, when real estate is hot or we are in a refinance boom the program creeps near extinction.  When things are bad the program generates enormous interest.

     It generates interest not necessarily involvement.  It amazes me how few loan officers at Universal Lending take part in a program that works and how few Realtors will continue to stay interested in what many real estate trainers are calling the future of selling real estate.  The programs most successful Realtor, who has done 16 Housesmart transactions over the last few years, doesn’t even call me and I am now the coordinator of the program.  Last year the National Association of Realtors introduced a program called Home From Work that mirrors our program and as far as I can tell has no real presence in Colorado.  Why is that? 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.   

     I had one of my Realtor partners call me yesterday and ask why her buyers, who were using another loan officer and closing on Friday were getting all new loan conditions and why they went from approved to not approved three days before closing. 

     We all know the answer to that, programs are being changed or dropped at a moments notice.  That is true and a great excuse but not the real truth on this deal.  The truth is there are still bad loan officers saying yes before they do their job.  In the past they could get away with it more because we had so many funky programs they could usually get them to fit into something.  The rate was way higher or closing costs had to be raised but although the buyer was unhappy with the loan they still closed.  

     Today if you are bad at your job, people will not close no matter what you do with rates or fees.  Many bad lenders are leaving the business but their are some who are desperately trying to hang in there and they are holding their clients hostage until they can land somewhere.  I have interviewed many brokers who say I have 10 deals please hire me so I can take them FHA.  The truth is they do not know FHA and 9 of the 10 deals are not deals, they are dead.  Instead of saying “okay I will call my clients”, they say “I will interview somewhere else”.  Good luck, the deal is still dead and you have never done an FHA deal in your 3 year career but I’m sure you know better. 

The biggest question if you are a borrower or a Realtor out there is; is this your loan officer? 

If you have stories or frustrations let me know.   

I just read a blog on the U. S. House voting to eliminate the “Phantom Tax”. I did not know what the “Phantom Tax” was until this post. Did you know that if you go into foreclosure and the mortgage company agrees to a short payoff that the IRS considered the amount you short paid to be taxable income? Are you kidding me? Your life is destroyed, you have your home foreclosed on and the IRS thinks you had a windfall. To read the complete article from Renae Bombardiere of HomTur Video Realty click on the following link: http://blog.renaesellscolorado.com/2007/10/08/tax-reflief-for-foreclosures/

The number one issue impacting values today in Denver are foreclosures. There are certain subdivisions in the metro area with over 40% of the sales being from bank owned sellers. That is a staggering statistic.

What can we do about it?

As leaders in the real estate industry we must effectively communicate in order to stop the downward spiral. Here are 5 important (easy to do) tips: Continue Reading »